Tax Reductions and Deferrals Announced

VAT and self-assessment tax deferral

Rishi Sunak  today announced that businesses who deferred their VAT this year will no longer have to pay a lump sum at the end of March 2021.

Over 500,000 businesses chose to defer paying VAT due between March and June 2020. Rather than paying in full by March 2021, they will now be able to spread their arrears by making interest-free payments throughout the 2021/22 financial year.

The Government has also announced that individuals who are due to pay tax by 31 January 2021 under self-assessment will be able to use HMRC’s ‘Time to Pay’ service to settle their arrears over an additional 12 months, meaning that they won’t need to pay in full until January 2022.  HMRC will charge interest until the tax is settled in full.

HMRC have confirmed that:-

• Time to Pay arrangements over 12 months to January 2022 will be automatically agreed via an online application for taxpayers who are due to pay £30,000 or less

• Taxpayers who are due to pay more than £30,000 or who wish longer than 12 months to pay will need to speak to HMRC to agree an arrangement

VAT reduction extended for hospitality sector

In his Summer Statement, Mr Sunak reduced the VAT rate for the hospitality sector from 20% to 5%.

As part of the packages announced today, the Government also announced that it will extend the temporary 15% VAT cut for the hospitality sector to 31 March 2021.  This is hoped to give businesses in the sector – which has been severely impacted by the pandemic – the confidence to maintain staff as they adapt to a new trading environment.

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.