Coronavirus 2 - What do I do about tax?
As I’ve said before it’s a new world and things are changing hourly, so check things out with an expert before acting. Government advice is changing daily and is pretty clearly laid out here:
Issue 2 - What do I do about tax? Ok, some of what I say I may not condone, but these are exceptional circumstances and I wanted to let you know what has worked for me and others in the past. Generally it is cheaper to use the taxman as a lending facility than the banks, so use that facility. Corporation tax This is probably the tax that is enforced least aggressively. HMRC only charge interest of 3.25% with no penalty. Just don’t pay it if you feel you need the cash. I wouldn’t even notify them, wait for the final enforcement letter then pay. VAT There is now an automatic deferral applying from 20th March until 30th June 2020 and businesses don’t need to make a VAT payment during this period. HMRC have stated “they will help people who are unable to pay their VAT on time and will be open to deterring payments, but still expect returns to be completed on time”. Ordinarily, If you are late filing a VAT return or making a payment, you will enter into a 12-month 'surcharge period' (probably about 5%). HMRC will be aggressive but will come to a deal. Personal Income Tax HMRC have scaled up their Time to Pay service - you will need to call them on 0800 0159 559 if you expect to miss your next payment due to COVID-19. Normally, the payment rate is 2.75%. You could also face penalties if you pay late: after 30 days: a charge equal to 5% of the tax outstanding, after six months (31 July): a further 5%, after 12 months (31 January the following year): an additional 5%. PAYE You'll be charged a late payment penalty if you pay less than is actually due. If you've still not paid a monthly or quarterly payment in full after 6 months, you'll be charged an additional penalty of 5% of the amount unpaid. A further penalty of 5% will be charged if you've not paid after 12 months Self-Employed The self-assessment due on 31st July 2020 will be automatically deferred until 31st January 2021. R & D Tax Relief Claim I have heard that these claims are going to be fast tracked and may be more lenient than in the past. If you don’t file for relief look into it, it’s not just tech companies that can make a claim HMRC are only human and like to set up agreements. A daily payment of a small amount is a good idea and will help you go to the back of the queue. HMRC and VAT are not preferential creditors nor do they have personal guarantees. You will end up talking to a person - some are more helpful and flexible than others. If you are getting nowhere, end the call with an excuse and ring back - you will almost certainly get someone else.