What to do if you can’t pay your tax bills because of COVID-19
As a small business, paying taxes may have been one of your primary concerns when news of the Coronavirus lockdown first came out. Making sure you have the right amount of money put aside to meet your tax obligations is one of the biggest responsibilities facing any self-employed person, entrepreneur or small business owner. So what happens is you find yourself unable to pay your tax bills because of COVID-19? We have all the answers.
You can defer your tax payments
Firstly, it’s important to point out that the government has introduced the option for all businesses to delay the payment of their Self Assessment payment on account, usually due in July 2020, to 31 January 2021. This gives businesses a little more time to get their houses in order and some much-needed breathing space.
If you decide to take advantage of this deferral, you won’t be charged interest or penalties for missing the July deadline.
When it comes to VAT, optional VAT deferrals have also been introduced. You can now opt to delay VAT payment due before June 2020 to as late as 31 March 2021. Again, you will not be charged any penalties or incur any interest charges if you take advantage of this special scheme announced by the Chancellor at the end of March 2020.
What if I still can’t pay?
If, by the time the deferred date comes around, you are still not able to pay your tax bills as a result of the impact of Coronavirus, you should contact HMRC well in advance of the due date. Businesses that are struggling to pay tax bills may be eligible for a ‘time to pay’ arrangement, which will allow you to meet your tax obligations over a number of instalments.
Time to pay arrangements were introduced to help small businesses deal with the financial repercussions of storm damage and flooding, but will, understandably, come in very useful to struggling companies still reeling from the impact of the Coronavirus crisis well into 2021.
Always be open and honest with HMRC
It’s tempting to bury your head in the sand when you find yourself struggling to pay your taxes. However, this is never going to help you find a solution. In light of this disastrous pandemic, HMRC are likely to acknowledge the fact that businesses all over the UK need extra help. Providing you contact HMRC as soon as possible, they will always try to help you meet your tax obligations. After all, from their point of view, when they receive your money is less important. They would much rather receive it late and help keep a tax-paying business alive, than make unreasonable demands and cause a business to fail.