In recognition of the extenuating circumstances faced by many due to the outbreak of the COVID-19 pandemic, HMRC have introduced a number of concessions this year to help mitigate the burden on taxpayers. This is a round up of those concessions.
Reasonable Excuse
HMRC have added COVID-19 to their guidance as an acceptable defence when seeking to rely upon reasonable excuse.
- Taxpayers need to be able to show how the virus affected them and the ability to meet their responsibilities. See: Coronavirus is a reasonable excuse.
- The taxpayer must show they remedied the situation as soon as possible.
- This is not an automatic excuse and will be subject to the facts of the case, as per Prime Aesthetics Limited v The Welsh Revenue Authority [2020] TC07948.
Interest
- HMRC reduced the late payment interest rate to 2.6% with effect from 7 April 2020. This applies to late payments of the main taxes and duties administered by HMRC.
- For companies in the Corporation Tax quarterly payment regime, the rate for underpayments of quarterly installments is reduced to 1.25% from 23 March 2020.
- Repayment interest rates remain unchanged.
See: HMRC reduce late payment interest rate
Income Tax Self Assessment
2018/2019
- Tax returns for 2018/2019 that are filed more than three months late will not be subject to daily penalties. See: Self Assessment 2018-2019 daily penalties waived by HMRC.
- All other late filing penalties will continue to be charged unless reasonable excuse can be shown.
- If the 2018/2019 return was not filed by 23 April 2020 then the taxpayer would not have been eligible for the SEISS, regardless of whether there was reasonable excuse for the late filing or not.
2019/2020
- The second instalment of 2019/2020 payments on account due by 31 July 2020 can be deferred until 31 January 2021. This is an automatic extension and does not need to be applied for. No penalties or late interest will acrrue. See: COVID-19 Deferring Income Tax payments.
- These payments on acount can also be paid off in monthly instalments under a Time To Pay arrangement. The instalments are available over a period of up to 12 months for liabilities of £30,000 or less and can be applied for online.
- HMRC have confirmed that they are still expecting tax returns to be filed on time (31 January 2021). If the return is late then penalties will be applied. Appeals can be made if there was a reasonable excuse.
Capital Gains Tax Self Assessment
From 6 April 2020, Capital Gains Tax (CGT) on all UK residential property sales must be reported and a payment on account made within 30 days of completion.
- HMRC deferred the introduction of penalties for late filing until 31 July 2020.
- Any transactions taking place on or before 30 June 2020 will not be subject to late filing penalties.
- Interest will continue to accrue on late payment.
Appeals
Taxpayers usually have 30 days to appeal any HMRC decision.
- For decisions issued from 20 February 2020 onwards, taxpayers will have a further three months to seek a review or make an appeal.
- Where an appeal to tribunal is made late, HMRC will not oppose the appeal if submitted within the extended deadline.
VAT
- From 20 March 2020 through to 30 June 2020, any VAT payments due can be deferred provided payment is made in full by 31 March 2021. See: COVID-19: VAT payments.
- Time to pay arrangements can be made to pay in monthly instalments of up to 12 months. This potentially delays full payment until March 2022. This arrangement is not open yet until early 2021.
- As of 1 December 2020, HMRC will become a secondary preferential creditor for any businesses entering insolvency. Any deferred VAT payments will become a debt and HMRC will sit third in line for payments behind fixed charge creditors and employees.
- The deadline for notifying HMRC of the VAT option to tax was extended to 90 days (from 30 days) for decisions made between 15 February 2020 and 31 March 2020. See: COVID-19: Option to tax deadline extended.
Companies/Corporation Tax
Companies House has extended a number of filing deadlines.
- Company accounts have a filing extension of three months.
- The confirmation statement deadline has been extended from 14 days to 42 days as have other deadlines to file notifications of changes to the company.
HMRC have issued guidance stating:
- The Senior Accounting Officer (SAO) certificate deadline, as required by HMRC, has extended by three months in line with Companies House deadlines.
- Companies with a CT600 filing deadline of 31 December 2020, who are experiencing difficulties meeting the deadline due to Covid-19 should contact HMRC. HMRC may defer the initial late filing penalty.