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October 7, 2020

Covid-19 - Time to Pay Arrangements

Last month, the Chancellor of the Exchequer Rishi Sunak announced that as part of the Government’s ‘Winter Economy Plan’ taxpayers who complete self-assessment tax returns can now defer their tax liabilities using HMRC’s formerly established Time to Pay self-service facility.

Following the announcement, HMRC have now confirmed more details about the practicalities of the scheme.

One of the Government’s previous measures was that taxpayers who were required to make payments on account for 2019/20 following submission of their 2018/19 tax returns (i.e. those with a tax bill of above £1,000 or those who had paid less than 80% of all tax owed) in July 2020 could defer this payment until January 2021 if they have been affected by COVID-19. However, the latest announcement means that these taxpayers can now apply online to spread this payment (along with any additional tax due for the 2019/20 tax year and their first payment on account bill for the current tax year) over up to a 12-month period.

In addition, previously taxpayers could only use the online Time to Pay arrangement to spread a bill of £10,000 or less. However from October 1, HMRC have increased this threshold to £30,000. This means there is no need to call HMRC when your liability is between £32 and £30,000. On the other hand, the applicant must also meet the following conditions:

- No outstanding tax returns
- No other tax debts
- No other HMRC payments set up
- It is no more than 60 days since the tax was due for payment.

If applicants do not meet the above criteria and/or the liability exceeds £30,000 then HMRC have stressed that they still might qualify for Time to Pay, however they will need to call HMRC’s Time to Pay Self-Assessment helpline to agree any kind of payment plan. Moreover, taxpayers should also call if they need more than 12 months to settle their liability. The number for this faculty is 0300 200 3822 and the opening hours are Monday to Friday 8am to 4pm.

If you choose to spread your liability over monthly instalments than these payments are interest free between the period of July 2020 (if applicable) and January 2021. However, you will have to pay interest at 2.6% (interest rate applicable from 7 April 2020) on all your outstanding tax from 1 February 2021.

This new arrangement is estimated to benefit around 11 million self-assessment taxpayers. For help with how this applies to you, please contact a member of our team.

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