Government Assistance to Taxpayers Facing the Credit Crunch

You may have seen from recent press reports that, in the current economic climate, HM Revenue & Customs (HMRC) is taking a softer line with requests to consider deferment of tax payments.  This has been formalised and HMRC has introduced a new, dedicated Business Support Service designed to meet the needs of businesses and other taxpayers affected by the current economic conditions. This will provide specific help where customers are worried about being able to pay tax, National Insurance, VAT or other amounts owed to HMRC.

In order to qualify for this service the business or individual must be:

• in genuine difficulty
• unable to pay their tax on time
• likely to be able to pay if HM Revenue & Customs (HMRC) allowed them more time

If you meet the above criteria, HMRC will consider a “Time to Pay arrangement” on a timescale that is reasonable and appropriate to your particular situation.  Unofficially we understand that HMRC has the authority to agree payment periods of up to 36 months.

Given that the deadline for any personal income tax liabilities will fall due by the 31 January 2009, in the event that you are affected by the current economic climate and meet the above criteria, this would seem a sensible time to make use of this service.

It is worth re-emphasising that this service is not just available for personal income tax liabilities but also for corporation tax, PAYE, National Insurance, VAT or other amounts owed to HMRC.

HMRC has confirmed that a surcharge can be avoided on late payment of income tax where a Time to Pay agreement is entered into before the relevant surcharge date AND the terms of the agreement are adhered to.

VAT default surcharges will also not be charged if the business contacts the service centre before the payment is due and agrees a Time to Pay arrangement. Entering into the Time to Pay agreement will not be treated as a default so it will not extend the 12-month rolling period nor will the default percentage increase because of the Time to Pay arrangement, provided the terms of the arrangement are adhered to.

Interest will however continue to be payable to HMRC on those taxes where it applies.  The current HMRC interest rates for late payments from the 6 January 2009 for income tax, corporation tax and VAT is 4.5%.

What to do Next

In the event that you anticipate that you will not be able to make any required payment due to HMRC you will need to contact the service centre by telephone on “0845 302 1435”.  When making such a call, you will need to have to hand the following information:

• your tax reference number
• details of the tax that you are or will have trouble paying
• basic details of your businesses income and outgoings

If we deal with your tax affairs as agent and a form 64-8 is in place with HMRC, we will be able to contact the service centre on your behalf. Of course, you still need to contact us in the first instance to explain your position and details of the amounts that you are presently unable to pay, etc.  HMRC may still need to contact you directly to set up banking arrangements.

It is very important that contact is made with the service centre before the payment deadline and not to leave it until after the payment has defaulted to avoid potential surcharges.  It is equally important that once an agreement is made, you stick to it.  It is likely that a failure to meet a scheduled payment will result in the total amount outstanding becoming payable immediately.

All tax returns must still be submitted in the normal manner by their due dates.

If HMRC has already contacted you about an overdue payment it's important that you call the original office that contacted you and not the service centre.

Further information on this service can be found on the HMRC website.

Other sources of Government-backed financial support

Last week, the Government announced a re-birth of the small companies loan guarantee scheme in a different form and under a different name – the support package will see the government guaranteeing up to 50 per cent of some £20 billion worth of bank loans to small businesses.  If you are interested, please see the business news section of our website or telephone me.

This information was kindly provided by Andrew Allen from Winter Rule Accountants.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.