Self assessment and the coronavirus


30 March 2020

HMRC help for those suffering financially due to coronavirus – self assessment tax payments.

First of all, I offer a warning regarding data security. There are many links and messages being sent around, suggesting that they are relevant to the help being rolled out by the Treasury, but which are not genuine. Before responding to any messages or relying on any advice, I urge you to seek advice directly from the source (see the official government website, www.gov.uk, for updates) or speak to a trusted advisor. It is an unfortunate truth that scammers are preying on the population’s heightened vulnerability to deprive people of their money or to access their personal data. 

The Treasury has created and adapted many schemes to assist individuals and businesses through this difficult time. While the main focus is and must be on our health, there is, of course, a high level of anxiety about our economic position. The schemes are too varied to cover in one go and so, here, I will focus on the changes made to the tax payments due under self-assessment. 

The Treasury has announced an automatic deferral of the payment on account that would be payable on 31 July 2020 until the following January with no interest or penalties for the late payment. There is a degree of ambiguity with some parts of the update but it is understood that this in fact only relates to the payments due for self-employed people - it does not cover the payment on account payable arising for those with other income sources. 

Payments on account are due in January and July each year and are based on the overall income tax liability for the most recently assessed year. The payments due in 2020 are based on the tax liability for the year ended 5 April 2019. 

The deferral will help ease cash-flow worries but it the payment is nonetheless payable and, if funds are available to make the payment, this should still be done, as it is a payment towards to the liability for the year ended 5 April 2020. While it is unlikely that the taxable income for many for this tax year will have fallen to the extent that no tax is payable, the impacts will be felt more fully in the following tax year. 

Trustees are also liable to make payments on account where the trust taxable income is sufficient to warrant them. The deferral does not apply to trust taxable income. Trust income is frequently made up of investment income and it is widely expected that income levels will fall during this period of uncertainty. 

There is no option for those, other than self-employed people, to defer the payment on account but what can be done is to keep on top of your tax affairs and, where income (and, accordingly, tax liabilities) are expected to fall, make a claim to reduce the payments on account in line with estimated figures. This is a mechanism that has been in place for some time and it is easy to make; if the claim is made online, records are automatically updated. Interest is charged if payments are reduced too low so it is important that any adjustments are made in good faith. If the following tax returns are prepared as soon as possible after the year to which it relates, any under or over payment can swiftly be dealt with. 

In addition to the specific schemes, if the payment of tax liabilities is a problem for you, speak to HMRC before the amount falls payable as ‘Time to Pay’ arrangements are available and considered case-by-case. 

The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at March 2020.