Additional government support has been announced for businesses, individuals and employees impacted by coronavirus (COVID-19) across the UK.
Extension to Tax Return filing and Income Tax payment deadlines
The normal Self Assessment Tax Return filing deadline is 31 January [2021) after the end of the tax year on 5 April [2020]. This is also the deadline when any income tax should be paid for 2019-20.
In late January 2021, individuals were granted an extension to submit their Self Assessment Tax Returns by 28 February. It was announced that individuals would not be charged a late filing penalty of £100 provided they submitted their Tax Return online by 28 February 2021.
Those who did not pay their Self Assessment tax bill by 31 January 2021 are now incurring interest at 2.6% on the outstanding balance and should pay their tax bill as soon as possible. Individuals were therefore advised to estimate their tax liability and pay this by 31 January 2021 to avoid late payment interest accruing.
Normally, a 5% late payment penalty is also charged, in addition to interest, on any unpaid tax that is still outstanding on 3 March. However, this year, because of the impact of the COVID-19 pandemic, HMRC is giving taxpayers more time to pay or set up a payment plan.
Potentially, an individual may not pay their tax bill until they have submitted their Tax Return and calculated their tax liability. As the tax return does not have to be filed until 28 February then there would be a real risk of the 5% late filing surcharge penalty accruing if the resultant tax was not paid by 3 March.
However, on 19 February 2021, HMRC announced that Self Assessment taxpayers will not be charged the 5% late payment penalty if they pay their tax or set up a payment plan by 1 April 2021. Taxpayers can set up a monthly payment plan online at GOV.UK.
New Self Assessment Self-Serve Time to Pay Scheme
If an individual deferred paying their July 2020 payment on account, they would need to pay the deferred amount, in addition to any balancing payment and first 2020/21 payment on account, by 31 January 2021. This may be a larger payment than they usually pay in January.
If an individual is unable to pay their Self-Assessment (SA) bill in full by 31 January 2021, they can set up a Time to Pay payment plan for up to 12 months online without speaking to HMRC. If individuals have Self Assessment tax debts of up to £30,000, they will able to access the Time to Pay facility through GOV.UK and will get automatic and immediate approval.
If their Self Assessment tax due is over £30,000, or individuals need longer than 12 months to pay their tax, they will still be able to use the Time to Pay arrangement by calling H M Revenue & Customs on 0300 200 3822 between Monday to Friday 8am to 4pm.
You can also call the helpline number if you have missed your tax payment date or you cannot use the online service. You do not need to contact HMRC if you have set up a payment plan online.
The second Self Assessment payment on account for 2019-20 was due by 31 July 2020. Individuals who thought that they may not be able to pay on time could choose to:
defer payment without penalty to 31 January 2021. Late payment interest would arise on amounts paid after 31 January 2021. Individuals do not need to receive HMRC approval. The system is automatic.
choose to pay the amount due as normal.
As announced on 24 September 2020, individuals can benefit from a separate additional 12-month extension by using the HMRC online Time to Pay self-service facility. This means that payments deferred from 31 July 2020, and those due on 31 January 2021, will now not need to be paid until January 2022. Deferment is not automatic. It must be claimed through the Time to Pay service. However, if taxes are less than £30,000 and up to date then a deferment will be granted up to 31 January 2022.
if you use the self-serve Time to Pay facility then interest will be charged on any tax outstanding after 31 January 2021. Interest will be charged at HMRCs published rates, currently 2.6% per annum, without penalty.
New VAT Deferral Payment Scheme
The VAT payments deferral scheme ended on 30 June and all VAT registered businesses, including MTD customers, are required to file and pay on time.
HMRC say that over 500,000 businesses used the VAT deferral scheme in 2020.
Businesses that deferred their VAT payment, that was due between 20 March and 30 June 2020, could deferring paying the VAT to HMRC until 31 March 2021. However, because of continued tough trading conditions, HMRC will allow extra time through a new deferral scheme that launched on 23 February 2021 and is due to close on 21 June 2021.
If a VAT registered business has deferred VAT its options for settling are:
• pay in full on or before 31 March 2021
• opt in to the new VAT deferral payment scheme after 22 February; or
• arrange a time to pay arrangement' with HMRC.
Under the new VAT Payment Scheme businesses can spread the payment, interest free, over a maximum of 11 equal monthly instalments ending no later than 31 March 2022. Any unpaid VAT will accrue interest at 2.6% from 1 April 2021.
HMRC say that businesses that can afford to pay their deferred VAT should still do so by 31 March 2021.
Businesses will need to opt in, but are all eligible, so long as they are up to date with filing their VAT returns and other VAT payments and be able to pay the deferred VAT by Direct Debit.
The VAT Deferral New Payment Scheme will require a Direct Debit to be set up as part of the digital opt-in process and this must be done by the authorised bank account holder. A business will pay the first instalment when it joins the Direct Debit scheme.
The later a business signs up to this scheme to spread the payments, the fewer and larger each instalment will be. For example, if the business joins the scheme by 19 March 2021 it can spread the payments over 11 instalments starting in March 2021. However, if it joins the scheme in June 2021 it can only spread the debt over eight instalments.
Businesses face a penalty as well as being charged interest on any tax that is due if they do not meet their VAT obligations.
If a business needs more help to pay their VAT, they may be eligible to get support with their tax affairs through HMRC’s Time To Pay (TTP) service. More information can found at https://www.gov.uk/difficulties-paying-hmrc.
If the you can’t use the online portal, or needs more help, they should call HMRC on 0800 024 1222 to arrange a payment plan. This telephone service will be open until 30 June 2021.
Corporation Tax and PAYE deferrals
There are currently no specific schemes available that are designed to defer payments of Corporation Tax and PAYE. If you are unable to pay these taxes on time then you should contact HMRC and seek a Time To Pay arrangement.
Extension to the reduced rate of VAT for Hospitality and Tourism
The government will extend the temporary reduced rate of VAT (5%) to tourist attractions and goods and services supplied by the hospitality sector. The temporary 5% VAT rate applies to the supplies that would normally be subject to the 20% standard rate of VAT.
This relief came into effect on 15 July 2020 and will now end on 30 September 2021 across the UK followed by an interim rate of 12.5% for the six months to 31 March 2022. It will return to the full rate of 20% on 1 April 2022. (updated 3 March 2021)
The 5% VAT rate applies to the following main supplies:
Food and drinks (hot or cold) served on the premises (excluding alcoholic drinks) and hot take away food and hot take away drinks (excluding alcoholic drinks). Cold takeaway food is generally subject to zero rate and not affected by the concession.
Hotel and holiday accommodation – hotels, caravan sites, guest houses, camp sites.
Admission fees to tourist attractions – such as zoos, theatres, fairs, amusement parks etc.
Takeaway food and drink
Some cold takeaway food and drink, e.g. crisps, bottled drinks and sweets, are always standard-rated. HMRC’s produce a guide for food. If food and drink is delivered and a delivery charge is added then the charge element is always standard-rated (20%) VAT, even if the food is zero rated.
Mixed supplies of food and drink can create difficulties. HMRC consider a gin and tonic sold in pub or restaurant as a single composite alcoholic drink which is subject to 20% VAT. However, a bottle of tonic sold separately is subject to only 5% VAT. On the other hand, a meal deal of a sandwich and an alcoholic drink, sold at a single price, is a mixed supply. This is because the two items can be separated. Each items supplied counts as a separate item for VAT purposes i.e. 5% VAT on the sandwich and 20% VAT on the alcoholic drink.
The old furlough scheme was to cease on 31 October 2020. A new Job Support Scheme was to be introduced on 1 November 2020. It is now delayed until April 2021 as the furlough scheme will continue until 31 March 2021.
Under the scheme, which will run for six months, the government will contribute 61.67% towards the usual hours not worked with the employer also paying 5% of hours not worked. Employees will therefore receive at least 73.3% of their normal pay i.e. 20% of hours worked plus 66.67% of 80% (from government and employer) for hours not worked. However, employees must work at least 20% of their usual hours.
It was initially announced in September 2020 that employees must work at least 33% of their usual hours. Furthermore, the government will contribute 33% towards the usual hours not worked with the employer also paying 33% of hours not worked. Employees would therefore receive at least 77% of their normal pay i.e. 33% worked plus 66% (from government and employer) of 66% worked.
The government will consider whether to increase the minimum 20% hours’ threshold after the first three months of the scheme. The scheme will operate in addition to the £1,000 Job Retention Bonus (which is now postponed until further notice).
The Kickstart Scheme was set up by the government to help create work placements for at least 6 month’s work in a business designed at providing jobs skills for 16 to 24 year olds who are on Universal Credit and deemed to be at risk of long term unemployment.
Employers will receive government funding for each job will cover the National Minimum Wage, employer's national insurance and work place pension contribution.
There is an extra £1,500 available to help cover setup costs, support and training.
New jobs must be created under the scheme rather than replace existing jobs or causing current jobs to be lost or hours reduced.
See more UK practical business advice: COVID-19 on our website.
See gov.uk for a collection of 'Financial support for businesses during coronavirus (COVID-19)'