HMRC sends out incorrect tax demand letters

Founding Director, Michael Chadwick, gives advice about how to avoid HRMC tax deferral confusion.

Despite the Government announcing that you do not need to make the normal tax payment on 31 July, they have issued millions of letters to taxpayers reminding them to make the payment. 

HM Revenue & Customs have stated that:

• You have the option to defer your second payment on account
• They will not charge interest or penalties on any amount deferred. 

The only condition is that you bring your payments up to date on or before 31 January 2021. 

If you choose to defer

You do not need to tell HMRC that you are deferring your payment on account. If the payment is not made by 31 July 2020, HMRC will assume you are deferring until 31 January 2021.

This does not mean that HMRC will not continue to write asking for the money.

Avoid confusion with other payments

Please do not forget that other payments may also have to be paid by this date. This could include:

• balancing payment due for the 2019/20 tax year
• first payment on account due for the 2020/21 tax year.

Payments made by Direct Debit

If you choose to defer and normally make your payments by Direct Debit, you should cancel the payment via your bank as soon as possible, so that HMRC will not automatically collect the sum you do not need to pay.

If you want to pay in full

You may choose to pay the deferred liability in full any time between 31 July 2020 and 31 January 2021. This would avoid a large payment at the end of January next year.

Already have arrears?

You need to contact HMRC if you already have arrears which you are paying via “Time to Pay” and want to include your 31 July 2020 liability in the arrangement. 

After the tax deferral ends

The usual interest, penalties and collection procedures will apply to any other missed payments. Self assessment returns must still be filed by their due date and it is more important than ever to lodge the 2019/20 return well ahead of the 31 January 2021 deadline. This will assist planning for the tax payment due in January 2021 and perhaps crystallise any relief as a result of trading losses.

If you would like to discuss this further, please contact a member of our tax team on 0161 370 9600 or email: info@chadwickandco.co.uk