Newsletter January 2021

Self Assessment and VAT Reminders

The second payment on account for the 2019/20 tax year was due by 31 July 2020.

However, if the July 2020 payment was deferred until 31 January 2021, this was automatically granted with no applications required. No penalties or interest for late payment will be charged in the deferral period. Therefore, anyone who wished to make their payment by 31 July 2020 could do so.

On 24 September 2020 as part of the Winter Economy plan it was announced that taxpayers with up to £30,000 of Self-Assessment liabilities due on 31 January 2021, whether deferred from July 2020 or not due by 31 January under self-assessment, could make payment in 12 monthly instalments under the time to pay arrangements. This means the final payment would not be due until January 2022.

Taxpayers using self-serve time to pay will still be required to pay interest on tax owed from 1 February 2021. No eligibility criteria have yet been released and it may be that taxpayers will need to provide evidence that they are unable to pay on time.

Going forward it is likely that many businesses will also see a drop in profitability in the 2020/21 tax year. The first Income Tax payment on account for 2020/21 will be due on 31 January 2021, businesses should monitor their position as we reach the end of 2021 and make an appropriate claim if necessary.

VAT

As previously advised, HMRC will change the system for businesses not registered for Making Tax Digital for VAT (MVD) from March 2021 as to how they submit their VAT returns. That means no VAT registered business will be able to use the Government Gateway any longer. Action is required by VAT registered businesses not currently within MVD, and/or their agents, no later than 28 February 2021.

VAT registered businesses who already use MVD are not affected by this change.

Businesses who use MVD should continue to file their VAT returns as usual, although they may notice a change in how the service looks.

To continue paying VAT by direct debit, HMRC will require a current and valid e-mail address for the business. HMRC will request businesses provide this information, ideally via their Business Tax Account (BTA). This allows HMRC to comply with UK banking regulations to notify payers of the date and amount that will be taken.

Agents will no longer be able to use the agent online service to submit VAT returns. Returns must be submitted via the agent’s Agent Service Account (ASA).

VAT registered businesses were not required to make VAT payments that were due from 20 March 2020 to 30 June 2020. This relief was automatic - it did not need to be claimed. The VAT liability and payment was not cancelled, they were deferred. Any VAT liability will need to be settled by 31 March 2021 unless the payment scheme is used.

2020 Self Assessment Tax Returns

May we remind all readers that the filing date for tax returns is still the 31 January 2021 and HMRC have confirmed there will be no extension to the filing date or late filing penalties. However, HMRC have confirmed they will consider appeals against late filing penalties if it relates to COVID-19 reasons.

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