self assessment tax returns

Time and time again, the UK government is trying to reduce its citizens’ burden and induce better economic growth. Combatting the atrocities of the COVID-19 pandemic has been immensely arduous. Since the month of March 2020, numerous schemes have come our way as a relief measure.

There were a series of significant announcements from Chancellor Mr. Sunak on September 24, 2020. These announcements were part of the Winter Economic Plan of the government.

A special relief plan for self-assessment taxpayers came into effect with the declaration. The chancellor has planned to increase the threshold limit for the “Time to Pay” arrangement scheme. Self-assessment taxpayers, who have to file their tax returns and pay their taxes for the financial year 2019, will benefit from the scheme. With effect from October 1, 2020, the new limit is available to taxpayers looking for a structured payment plan.

The scheme will benefit about 11 million self-assessment taxpayers in the UK. The government anticipates that the enhanced Time to Pay arrangement will bring a much-needed respite to the people. The measure will even help to save more jobs and reduce the pressure of numerous business owners. It is anticipated that almost 95 percent of the self-assessment taxpayers will be eligible for the Time to Pay arrangement.

What is the Time to Pay arrangement?

The Time to Pay arrangement is a scheme from the HMRC, which gives taxpayers the option to pay their taxes using a structured payment plan over a pre-determined time frame. It is available to all taxpayers who are filing a self-assessment tax return. Those who lack financial resources to meet their tax obligation can fully pay their debt in instalments. It is similar to the periodic instalments payable on loans.

Thus, the self-assessment taxpayers can use the Time to Pay facility after completing the return filing process for the tax year 2019-2020. It will help those having insufficient funds to fulfil their tax obligation. The arrangement is permissible to the taxpayers obligated for VAT (Value Added Tax), Corporation tax, or taxes under the UK’s PAYE scheme.

What are the eligibility conditions for opting for the Time to Pay arrangement with the HMRC?

To use the Time to Pay facility of the UK government, entities need to meet the eligibility conditions which the HMRC has slated. Business entities struggling to make ends meet can apply to the HMRC for a structured payment facility. The plan is usable for all taxpayers whose self-assessment liability falls due on January 31, 2021. Taxpayers who have a deferred second tax payment for 2019-20, which was first due on July 31, 2020, can also use the plan. They have to comply with the following requirements to ensure that their application gets accepted.

  • Any self-assessment taxpayer who wants to benefit from the arrangement has to send suitable proposals to the HMRC
  • The taxpayer must not have any outstanding tax returns or other tax debts. The amount of debt must range between the limits specified (£32 to £30,000)
  • One needs to state in the application about what amount he can manage to incur as per their financial ability. Make sure to list out a payback sum that is viable for your business. HMRC can deny approval for your Time to Pay application if it disagrees with the viability of your payback proposition.
  • You need some specific verification documents to prove the affordability of the payback terms for your Time to Pay application.

Corroborating records to get approval for your application includes the following:

  1. Cost reduction plans of your business
  2. Sales or cash flow forecasts
  3. Any documents that vouch for your business ability to pay the tax instalments
  • HMRC will evaluate the level of compliance of your entity with the required rules and regulations.
  • An appraisal of your entity’s nature of business is also conducted to look into the risk of default after you undertake the Time to Pay arrangement. It is ideal if there is no past incidence of default or distrust in your firm. Any business entity which already entered into a Time to Pay arrangement may find it difficult to get an approval for the facility again.


What is the duration for which self-assessment taxpayers can use the Time to Pay arrangement?

Any business entity looking to opt for a Time to Pay arrangement with the HMRC has to clearly state out the instalments and the duration of the facility. Any regular Time to Pay contract can last for about 6 to 12 months. A self-assessment taxpayer using the facility must repay all their tax obligations within the pre-determined period.

HMRC will conventionally not agree to a payment plan which exceeds the limit of 12 months. However, in some exceptional situations, it may accept to negotiate to extend the duration. The tax authority has to find a legitimate reason for negotiation. One can contact the HMRC officials through the helpline for relevant details.

What is the process for self-assessment taxpayers to set up a payment plan with HMRC?

Taxpayers need to create a self-assessment time to pay arrangement plans online. The payment plan must be set up not later than 60 days from the due date of the debt. Hence, if the self-assessment tax payment deadline is January 31, 2021, the last date for setting up the payment plan is April 1, 2021. Use the HMRC online account to set up the plan.

What is the provision for applicability of interest on the amount due under Time to Pay arrangement?

The UK government shall levy interest on the amount due under the Time to Pay arrangement. The interest shall apply to the outstanding tax liability from February 1, 2021.

What are the consequences if you fail to make due payment under the Time to Pay arrangement?

If any person fails to uphold the liabilities under the Time to Pay arrangement, the HMRC shall rescind the facility. It can lead to legal action against the defaulting taxpayer. A distraint order notice may be issued, which can cause the seizure of property and insolvency of your entity. Hence, it is highly recommended to set up a manageable plan for your entity.

What is the impact of the announcements under the Winter Economic Plan on the Time to Pay arrangement?

The declarations made with the Winter Economic plan provide the facility of eased payment arrangements to self-assessment taxpayers unable to pay their tax bills due on January 31, 2021. The tax threshold for availing of the Time to Pay facility has enhanced from £10,000 to £30,000. This limit is applicable from October 1, 2020.

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