No surcharge on overdue tax until end of March

There is usually a 5% surcharge added to any Self Assessment tax outstanding at the end of February. For 2021, this has been delayed and will only be levied at the end of March. Another small but useful concession at a time when cashflow is a significant problem for so many.

Where a ‘time to pay’ arrangement has been put in place, in most cases no surcharge will apply, although interest does still run on any amount overdue (currently at 2.6%).

No £100 late filing penalty for February returns

HMRC have just announced that where 2020 tax returns are filed before the end of February 2021, no £100 late filing penalty will be charged.

There has been significant pressure for HMRC to offer some concession. Given the number of appeals they would be likely to receive, and the time and cost of processing all of these individually, this is a pragmatic step. It is also likely to be welcome news to tax advisers who have found that their own work or availability has been impacted, whether by illness, changed family arrangements, or time spent assisting clients with information on furlough arrangements or the SEISS grants.

Where any taxpayer’s return is delayed beyond the end of February for personal reasons – whether related to the pandemic or not – it will still be possible to appeal a late penalty in the usual way, asking HMRC to consider the circumstances.

Late-paid tax is still subject to interest – the current rate is 2.6% per annum. Any tax outstanding after the end of February attracts a 5% surcharge, although the surcharge does not apply where an instalment arrangement has already been agreed with HMRC.


Requesting extra time to pay tax

This year especially, a large number of taxpayers are finding they need to ask for a ‘time to pay’ arrangement, spreading their Self Assessment tax in instalments.

HMRC has opened an online request form for taxpayers to arrange a spread of payment 

HMRC’s Payment Support phone line is still open also, 0300 200 3822 Monday to Friday 8am to 6pm.

I am suggesting that any clients needing to make use of this try the online facility once the submitted tax return shows in Gateway (usually two or three days after it is submitted). If that is not possible, if the online facility is rejecting the application, or is offering a spread of payment that is not manageable, then try a phone request. It is best to have the tax calculation to hand when ringing.

It is possible that there may be further concessions offered later this year, and if so I shall add details here. HMRC has not extended the 31 January deadline (despite calls to do so). If a tax return is late for health or other reasons, whether Covid related or not, it is possible to appeal the £100 late penalty, explaining the circumstances. HMRC then consider each appeal individually to decide whether to waive the penalty.

Making payment:

Time to pay:

Grants under Self Employed Income Support Scheme – SEISS 3

Applications have opened today for this.

The numbers involved are the same as for the first grant – based on the same year’s profits, with 80%, to a maximum of £7,500, available. To make a claim for the third grant, it is not necessary to have claimed before if you are eligible at this point. No new categories of taxpayer have been added as being eligible.

Taxpayers must meet a number of conditions, some of which are new. In particular, they must reasonably believe their trading profits will be significantly reduced between November and the end of January due to coronavirus and:

  • either be currently trading but are impacted by reduced business activity, capacity or demand, or have been previously trading but are temporarily unable to do so due to coronavirus
  • declare that they intend to continue to trade, or restart trading, and that they reasonably believe that the impact on their business will cause a significant reduction in their trading profits
  • only claim if the reduction in profits is caused by reduced business activity, capacity or demand, or inability to trade due to coronavirus – reduction in profits due to increased costs (such as having to buy masks, new technology or longer working hours) does not make a business eligible for this third SEISS grant.

HMRC ask claimants this time to make ‘an honest assessment about whether they reasonably believe their trading profits will be significantly reduced’ compared to what they would otherwise expect during November December January. They ask that taxpayers consider their ‘wider business circumstances’. There is no definition given of what ‘significant’ means here. For taxpayers who have other/new types of income, eg a different, salaried temporary job, it is ultimately a personal decision whether to claim or not.

HMRC’s SEISS helpline 0800 024 1222 is open  8am – 4pm weekdays.

Business must have been impacted on or after 1 November 2020 and claimants need to keep evidence of the impact (eg cancelled work). For taxpayers who are uncertain, my suggestion would be to wait until later in the claim window, which closes 29‌‌ January 2021, before deciding – by that point it should be possible to compare profits for those three months with those from a year ago. Proof of the impact of coronavirus (the figures themselves and cancellations or eg diary records) become part of taxpayers’ records for tax purposes.

As before, any amount claimed will be subject to income tax and national insurance in the return for the year to 5 April 2021.

There are some examples on‌‌ G‌‌‌‌O‌‌V‌‌.UK to help taxpayers considering whether they should be claiming‌‌ and claims can be made here: 

A fourth grant is planned for February‌‌ 2021.

Grants under Self Employed Income Support Scheme – SEISS 3 November

There will be further amounts offered under SEISS through to spring of 2021.

At the moment, nobody whose previous profit figures ruled them out will qualify. (For example those with average profits over £50,000.)

Taxpayers who were eligible before may apply, but note that the questions will be different when the next application is made. In particular, there will be a question this time about whether there is less demand/fewer customers since March of this year, for businesses affected.

As before, anyone applying must read the questions carefully and ensure that the declaration is correct at the time it is made. Unless there are specific questions asking about future plans (eg intention to keep trading), SEISS grants are based on the situation at the time the boxes are ticked.

The next, third, claims open during the last week of November via Government Gateway. After several changes, on 5 November the Chancellor announced that the next amount will be 80% of the ‘test profits’, up to a maximum of £7,500. This is the same way that the first (spring 2020) amount was calculated. It is intended to assist during November, December and January. (Details of plans for a further grant expected for February to April 2021 have not been released yet.)

For any taxpayer who qualified before based on their figures, but did not claim, they can make this as their first claim under SEISS if they can now answer yes to all the questions in the declaration.

SEISS grants are part of taxable profits for income tax, but are outside the scope of VAT. 

Extended payment deadlines for income tax

Taxpayers with payments on account due 31 July 2020 have already been allowed to delay payment until January.

The Chancellor has announced that there will now be a concession for payments due in January 2021, allowing later payment.

HMRC anyway runs a helpline to agree ‘time to pay’ arrangements. It may be that the new concession will mean payment can be delayed without the need for any formal agreement, possibly without interest being charged. I shall update on this as further details are announced.