VAT or Income Tax Deferred due to Covid 19 and due in January 2021

At the beginning of the coronavirus pandemic, the government gave individuals and  businesses the option to defer, until 2021, payments of Income Tax due by 31 July 2020 and VAT due in the period 20 March to 30 June 2020.

This wasn’t compulsory and you could choose to pay both taxes at the due time if you wished however many taxpayers and businesses took advantage of this deferral system and both of these would be payable in early 2021.

So, with 2021 just around the corner what are your options ?

Income Tax Payments due by 31st January 2021

If you deferred your July 2020 2020/21 Payment on Account most taxpayers will be looking at the first three payments set out below however I have included the Capital Gains Tax Payment just in case:

• Second payment on account for 2019/20 (deferred from 31 July 2020)
• Balancing payment for 2019/20
• First payment on account for 2020/21
• Capital Gains Tax for 2019/20 (if not paid under the new 30-day rule for UK residential property)

Option 1

Pay all the tax on or before 31st january 2021

Option 2

Taxpayers with up to £30,000 of self-assessment liabilities due on 31 January 2021, whether deferred from July 2020 or otherwise, can pay in 12 monthly instalments under the time to pay arrangements. This means the final payment will not be due until January 2022. Where the total tax due does not exceed £30,000, you can make your application online by clicking https://www.gov.uk/difficulties-paying-hmrc and deferral will be automatically granted.

If the total tax due exceeds £30,000, or you need longer to pay, you will be able to call HMRC to agree a bespoke payment plan.

Option 3

The third option would of course to do a combination of the two by paying what you can and requesting to spread the remainder over 12 months.

VAT Deferred from March – June 2020

Where you have deferred VAT which was due in the period from 20 March to 30 June 2020, that VAT will be payable by 31 March 2021. However, you will be able to apply to spread the deferred VAT payment over smaller instalments through until March 2022. This deferred VAT will not be subject to interest or penalties if the payments are made on the dates as agreed.

If you have any questions please get in touch.