Deferral of July 2020 SA payments on account – check HMRC’s guidance
Clients will be receiving their statements from HMRC for the July 2020 SA payments on account – it is important to check HMRC’s guidance on deferring payments due to coronavirus.
HMRC paper statements
Many clients will currently be receiving paper statements from HMRC for their July payments on account. Instead of showing the due date for payment as 31 July, they show a due date of 31 January 2021. The statements explain that the July 2020 payment on account ‘can’ be deferred – and that to find out more HMRC’s guidance on GOV.UK should be consulted.
It is important to refer to the guidance, which states that the option to defer the second payment on account is available if the taxpayer is:
- registered in the UK for Self Assessment, and
- finding it difficult to make their second payment on account by 31 July 2020 due to the impact of coronavirus
The guidance goes on to say that:
“You can still make the payment by 31 July 2020 as normal if you’re able to do so.
HMRC will not charge interest or penalties on any amount of the deferred payment on account, provided it’s paid on or before 31 January 2021.”
Clients using online accounts will see that the payment on account will be due for payment at 31 July, accompanied by a message to say that it can be deferred until 31 January 2021 - if they cannot pay because of coronavirus.
Deferral of the July payments
The deferral does not need to be applied for, so if clients do not pay HMRC will automatically treat it as a deferral. However, if a direct debit is in place this will need to be cancelled so that HMRC does not take the payment.
In addition to considering HMRC’s guidance that deferral is available where payments cannot easily be made due to coronavirus, it is also important to note that in January 2021 the total bill could be much higher if the July payment is deferred. It will need to be budgeted for and will include:
- the deferred July payment
- any balancing payment for the 2019/20 tax year, and
- the first payment on account for the 2020/21 tax year.
For many clients paying the July payment on account now, if they can do so, will make sense from a financial management perspective. If payment cannot be made now but things improve later, it can also be paid at any time between 31 July and 31 January. HMRC sets out the options (including possible payment by instalments) in the guidance.
When advising on payment on account deferrals (or any other COVID-19 support) members should be mindful of professional standards, and in particular the requirements of PCRT. ICAS is aware that there are differing opinions on the application of PCRT to advice on payment deferrals. Where clients can afford to pay their July instalments, it is for them to choose to do so (taking into account HMRC’s guidance). In terms of financial management and their long term relationship with HMRC, it is likely to make sense to pay sooner rather than later.