Deferral of tax liabilities and other financial support
This article seeks to add some clarity on deferring tax (VAT, PAYE and CT) to HMRC now the various schemes and options are up and running.
It is important to note that the main restriction around the level of help an EU member government can provide to businesses is dictated by the rules of the European Commission (EC), who try to promote fair competition amongst businesses within member states and must actively authorise the level of state aid a government can offer. To tackle the issue of ensuring businesses continue to operate in these difficult times, the EC published the Temporary Framework where, through the dense hedgerow of provisions, there is a cap for the government of €800,000 per business. This specifically covers aid, such as grants, available to one business that are not available to all other businesses – by extension, this means tax deferrals and the CJRS should not be relevant to the cap because of their all-encompassing nature.
On 25 March, the UK received approval from the EC for its £50 Billion ‘umbrella’ scheme which is within the guidelines set out by the temporary framework but is UK specific. This allows aid in the form of direct grants, loans, and equity injections for UK businesses.
VAT
The information around VAT payments has been relatively clear on the HMRC website with its own page dedicated to the topic, to recap:
- A UK VAT registered business with a VAT payment due between 20 March and 30 June can defer that payment without interest or penalties being charged. This includes VAT payments on account and annual accounting advance payments due between these dates, and quarterly and monthly VAT return payments for the periods ending February, March and April. This does not apply to import VAT or VAT due under Mini One Stop Shop arrangements.
- The guidance states you do not need to tell HMRC but the VAT must be paid on or before 31 March 2021.
- It is worth noting that, if a payment on account is being deferred because it falls between 20 March and 30 June, but the balancing payment falls outside of these dates then you are able to deduct the deferred payments to arrive at your balancing payment amount. This balancing payment is to be paid on time.
Employer’s PAYE
Outstanding PAYE tax liabilities can be ‘deferred’ via the HMRC Time To Pay (TTP) – service. HMRC can waive some interest if there are delays on their side when agreeing a TTP. This differs from the VAT deferral because interest on the outstanding balance will accrue daily until the full payment has been made. HMRC may also remove penalties that have been applied to the company if there is a valid reason why the payment could not be made or if you think the penalty should not apply. If your company is struggling to pay it is worth contacting the Time To Pay service to agree upon an arrangement.
Typically, HMRC will allow the debt to be paid off in instalments and will accept a delay on the first payment of up to three months.
Corporation Tax
In terms of CT payments, HMRC have been very good at offering extensions where the company has requested a deferral via the TTP arrangement – several of our clients have found this process straightforward.
As was found with Employer’s PAYE, deferrals for CT payments come in the form of paying in instalments, and the first payment may be deferred up to three months. Similarly, the key points are: interest accrues daily during the TTP scheme until the full amount is paid, the deferral must be agreed with HMRC first and, depending upon HMRC’s discretion, penalties may be cancelled with a valid reason.
Loans, Grants and Other Financial Support
Following discussions between the UK government and the EC, the three State aid schemes: (1) CBILS – the Government loans to help working capital and investment capital needs, (2) SME business grants, and (3) the £50Bn ‘Umbrella scheme’ have all been approved. This is because the relevant articles state that Coronavirus falls within the definition of a ‘serious disturbance in the economy of a Member State’ and so the UK can help businesses with these supporting measures.
The first and second schemes are set to run out on 30 September 2020, but the UK can extend them if needed until 31 December. You can’t help but wonder why the 31 December deadline was not put in place for the UK when both the Temporary Framework and its amendment (supposed guidelines on what governments can do) both state that aid is not to be granted later than 31 December 2020.
As stated above, the CJRS is not state aid. Therefore, the amounts claimed by employers under the CJRS will not be taken into account when determining whether the €800,000 state aid cap has been breached.
Our advice, if you wish to talk with HMRC, is to call earlier in the day – the number is 0800 024 1222 and they are open between 8am to 4pm during the weekdays.
If you wish to discuss this or any other Tax matters please get in-touch with your usual contact at Claritas Tax.
