pink diary page for January 2021
With the January tax deadline approaching quickly, you might be concerned that you won’t be able to pay all of your personal or business tax
If you are in this situation, you can contact HM Revenues and Customs (HMRC) about a ‘Time to Pay’ arrangement. 

What is ‘Time to Pay’? 

HMRC can agree a debt repayment plan for your outstanding taxes. If you are struggling to pay your corporation tax, VAT, PAYE, or self-assessment tax (SAT) you can ask HMRC for extra time to pay. 
In many cases you will be able to make arrangements to pay what you owe over six to 12 months. 

Will I qualify for a ‘Time to Pay’ arrangement? 

If you are already in debt with HMRC or expect to have problems with your payments, you will have to apply to set up the arrangement. HMRC must be satisfied that you can meet the terms and repay all your taxes in full. 
You will need to make proposals that show you can pay; however, you shouldn’t offer to pay back more than you can afford. 
You will need to provide evidence that you can meet your payments, such as 
sales forecasts 
measures you are taking to reduce costs 
commitment to pay your taxes. 
If you make an arrangement with HMRC, payments will be taken by direct debit to make sure they aren’t late. 

What will HMRC take into account? 

When deciding whether to make an arrangement with you, HMRC will consider a number of things, including whether: 
you have previously filed your tax returns late or received fines 
your business is in a high-risk sector which is very competitive or prone to cashflow problems 
your business has been severely affected by the coronavirus measures or other extreme market conditions. 

Deferred payments 

If you have deferred your self-assessment tax payments on account due in July, it’s important to make sure that you will have enough to pay them and anything else that is due on 31 January. 
While you won’t be charged interest or penalties on deferred payments the amount will be due in full. 
If you could afford to make your payment on account in July, you might have been confused to receive a letter from HMRC in June, saying it wouldn’t be due until January. This was an administrative step to make sure that interest and penalties weren’t applied, but it wasn’t clearly explained. 
If you deferred VAT payments between 20 March and 30 June 2020 and still have payments to make, you can pay in full on or before 31 March 2021 or opt into the new VAT deferral payment scheme when it launches next year. If you expect to have difficulty paying the amount due, you can contact HMRC about a time to pay arrangement. 

Take professional advice before applying to HMRC 

If HMRC doesn’t accept your application you will need to find another way to meet your obligations, through a financing arrangement, for example. 
To avoid this happening, you can ask for the help of a professional to carry out a review of your financial position, to provide a statement of your affairs, and to produce a realistic financial forecast. If you wish, they can speak to HMRC on your behalf. 
HMRC has a help line for self-employed people and businesses having difficulties during the coronavirus pandemic, including advice on tax and benefits. The helpline can be reached on 0800 024 1222. 
If you would like help to review your business finances and tax liabilities, please get in touch
Tagged as: tax, tax return, VAT
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