As the UK Government acts quickly to mitigate the impact of the Covid-19 pandemic on the future of the UK economy, a great deal of information has been issued in a short space of time. Sarah Illidge, specialist tax lawyer at Lupton Fawcett, provides guidance through the main points that businesses need to understand.
Over the past few days the Government has announced a package of measures designed to support businesses through Covid-19. This note focuses on the tax concessions which have been announced to date. We will continually monitor further developments and update this page.
All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time to Pay Service. HMRC has set up a dedicated helpline 0800 0159 559 designed to assist businesses which have missed a tax payment or might miss their next payment due to Covid-19. Time to pay arrangements are agreed with HMRC on a case by case basis and are tailored to the individual circumstances and liabilities.
The Government is introducing a business rates holiday for retail, hospitality, leisure and nursery businesses in England for the 2020/2021 tax year. Businesses within these sectors do not need to take any action and it will be applied to your next council tax bill in April 2020.
All businesses paying VAT will be able to defer their VAT payments from 20 March 2020 until 30 June 2020 at present. This is an automatic offer with no applications required. Businesses will be given until the end of 2020/2021 tax year to pay any tax liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the Government as normal.
HMRC has now confirmed that if your business normally pays its VAT by direct debit and you decide to defer VAT payments in line with the above offer, then you will need to cancel the direct debit. HMRC cannot cancel the direct debit unilaterally. You will therefore need to take action to cancel the direct debit sufficiently far in advance of the usual VAT payment date to ensure that HMRC do not collect the payment automatically.
If you do cancel your direct debit for VAT so as to defer your payments, then you must remember to re-instate the direct debit mandate in due course.
It is important to note that if you decide to defer your VAT payments, the VAT accumulated during the deferment period will still need to be paid at a later date. This offer is therefore helpful to assist with urgent cash flow requirements, however, it would be prudent for businesses if at all possible to set aside cash ready for eventual payment at a later date.
If you are self-employed then income tax self-assessment payments due on 31 July 2020 will be deferred until 31 January 2021. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.
The implementation of the reforms to the off-payroll working rules for the private and third sectors which were recently confirmed in the 2020 Budget and which were due to come into effect on 6 April 2020 have been postponed as part of the government’s Covid-19 economic response package. The Government has emphasised that this is a deferral and not a cancellation of the reforms. The reforms will now come into force on 6 April 2021.
This delay will give businesses in the private and third sectors time to properly prepare for these changes and HMRC will hopefully improve communications around the changes, both of which have been of concern to businesses in the lead up to the reforms. In light of this reprieve, we would encourage businesses as soon as they are able to do so, to fully prepare for the new rules by reviewing their workforce and the obligations imposed on private and third sector businesses under the new rules. Please see our briefing note on the changes to the off payroll working rules for the private sector for further details.
If you require further information on any of the concessions outlined in this note during Covid-19 or you would like assistance in preparing for the reforms to the off payroll working rules, then please contact Sarah Illidge via the enquiry form.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.