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How to set up a payment plan for your taxes with HMRC

February 24 2021 by Gayatri Wood

The government is helping businesses through the current situation by allowing you to defer tax payments.

Here’s what you need to know and what you need to do:
  1. If you have a VAT payment that was due before 30th June 2020, you can defer payment of this until 31st March 2021 without contacting HMRC. If you have a direct debit set up with HMRC for VAT, cancel this to avoid the payment being automatically taken
  2. For all other taxes, HMRC has a dedicated phone line to agree payment plans for taxes: 
  • The number you need to call is 0800 024 1222. The line is open between 8am and 4pm Monday to Friday (excluding Bank Holidays)
  • A director or owner of the business has to call to discuss payment with HMRC
  • You will need to explain why your business has been affected by COVID-19 and therefore why you need to delay payment of your taxes, e.g cancelled contracts, travel plans or staff absences due to self-isolation
  • Please make sure that all of your tax filings are up to date
If you deferred VAT payments due between 20th March and 30th June 2020 and still have payments to make, you have some options

You can:

  • pay the deferred VAT in full, on or before the 31st March 2021
  • join the new VAT deferral payment scheme – more information below
  • contact HMRC on 0300 200 3859 by the 30th June 2021, if you need extra help to pay
The new VAT deferral payment scheme

The online service is open until the 21st June 2021. The new scheme lets you pay your deferred VAT in equal instalments, interest-free. You can choose the number of instalments, from 2 to 11 (depending on when you join).

If you’re on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme, you’ll be invited to join the new payment scheme later in March 2021.

The month you decide to join the scheme will determine the maximum number of instalments that are available to you. If you join the scheme in March, you’ll be able to pay your deferred VAT in 11 instalments or fewer. The later you join, the less instalments you’ll have available to you.

Before joining, you must:

  • create your own Government Gateway account (if you don’t have one already)
  • submit any outstanding VAT returns from the last four years
  • correct any errors on your VAT returns as soon as possible
  • make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid

To use the online service, you must:

  • Join the scheme yourself from your Government Gateway account
  • If you’re a Wow client, we can do this for you or help you with it
  • join by the 21st June 2021
  • pay the first instalment when you join
  • pay your instalments by Direct Debit (if you want to use the scheme but can’t pay by Direct Debit, there’s an alternative entry route for you)

If you join the scheme, you can still have a Time to Pay arrangement for other HMRC debts and outstanding tax.

What non-VAT payment plans HMRC are agreeing to:

Every situation is different and what HMRC agrees for you will depend on your current situation and your history with them. There are no rules to go by. However, a number of our clients have been able to:

  • Defer PAYE for 3 months
  • Spread Corporation Tax payments over 12 months
The information to have handy when calling HMRC:
  • Company registration number
  • Company address
  • Company telephone number
  • Company Unique Tax Reference – if discussing Corporation Tax
  • PAYE and accounts office reference numbers – if discussing PAYE
  • VAT registration number and the figure from box 5 of your latest VAT return filed (it needs to be filed) – if discussing VAT
A few practical points:
  • If you have any indication that you won’t be able to stick to the agreed plan, please communicate with HMRC as they can renegotiate the dates and amounts
  • HMRC may insist on Direct Debit collections 
Virus or not, here are the usual questions HMRC like to ask and some reasons why:
  • What is the cause of the cash shortage? Usual answers would be as above or delayed payments from clients or bad debts, delayed receipt of a grant, etc
  • What have you done to ensure this won’t happen again (this is unlikely to be asked on the Coronavirus number) – it is worth having a cash flow forecast drafted for the next few weeks?
  • Have you approached your bank or tried to obtain credit at some other places? HMRC want to make sure that they are not used as a free credit facility.
  • Have the directors been taking drawings/dividends from the company? HMRC would like to ensure they are not at the end of the payees list. They accept the fact that salaries/overheads are the priority, but not after drawings/dividends
  • Are you up to date with all other taxes? If not they will be looking to pass the call to debt management who can agree on a plan for the whole debt.
  • What and when can you pay? Please be prepared to commit to some dates and amounts. Ideally, HMRC would like some of the debt to be paid within the deadline, as this increases their debt recovery chances and shows goodwill.

We understand that this is a stressful time for you and your business. HMRC is operating on reduced staff numbers and is working relentlessly to help as many callers as they can – usually we find, the nicer we are to them, the more willing they are to help. 

Make a cup of tea and be prepared for at least an hour-long wait on hold, probably longer. Please contact us if you need a hand with any information above, or you’d like to chat through your approach to the call before picking up the phone.

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