Beware the cash flow cliff edge

Oct 21, 2020 | DY News, Uncategorized

Shropshire taxpayers who fear they will struggle to meet their bills have been reassured that
help is available.

But Martyn Bramwell, who is the Tax Manager here at Dyke Yaxley Chartered Accountants, said business owners should take care that they were not approaching a cash flow cliff edge.

“As part of the Government’s response to Covid-19, they have introduced an option for customers to spread their tax payments. It’s always advisable to contact HM Revenue and Customs as soon as possible if you’re worried you can’t meet your tax liabilities or you have missed a payment.

“And now, as long as your self-assessment tax liability is less than £30,000, you can use the new online application to spread any potential financial burden caused by the Coronavirus pandemic.”

Martyn said taxpayers should prepare and submit the 2019-20 tax return and then use the online Time to Pay service on the Gov.uk website.

“The website will give you the opportunity to set up a direct debit and pay any tax that you owe in up to 12 monthly instalments.”

Taxpayers will need to meet specific conditions though to use the scheme: no outstanding tax returns or other tax debts; no other HMRC payments set up; a self-assessment bill over £32 and under £30,000; and it must be no more than 60 days since the tax was due to be paid.

“If you don’t meet all the criteria, you may still be able to set up a time to pay arrangement, but you won’t be able to do it online and you’ll need to call HMRC instead.”

Martyn said from February 1, 2021, HMRC would be charging interest on any late payments, even if you have a time to pay arrangement set up.

The option to spread payments is in addition to the opportunity to defer self-assessment liabilities from July 2020 to January 2021.

“The danger is that business owners may well be heading towards a cliff edge with deferred VAT, self-assessment liabilities and potentially loan repayments under the Bounce Back/CBILS schemes all falling due in the first half of 2021.

“So it’s vital that you manage cash flow carefully and realistic forecasting will be key going forwards to avoid any potential disasters.”

 

Martyn Bramwell – Tax Manager

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