020 8339 1930
As every business owner should know, never underestimate the potential impact of cashflow. Sound businesses have fallen victim to the implications of cashflow problems and VAT is a common issue. Many businesses have faced the scenario of having a full order book, large VAT liability and insufficient cash in the bank to pay it.
A ‘time to pay’ scheme for taxpayers who cannot pay their tax liabilities by the specific deadline has existed for some time but now, a new facility to easily create a VAT payment plan online has been launched. This means it’s no longer always necessary to make arrangements for time to pay over the phone or in writing, depending on the amounts involved.
Time to pay is a very important facility because it ensures that taxpayers who find themselves in difficulties may not incur penalty fines, provided the arrangements are made before the tax is overdue.
Typically, time to pay agreements are not longer than 12 months, although there are exceptions. HMRC usually tries to make the payment term as short as possible to ensure it gets the money sooner rather than later. Taxpayers can attempt to negotiate terms but should appreciate that the maximum repayment term available is 6 months, any longer periods can only be approved through the traditional business support facility.
The new time to pay VAT facility is available to VAT registered business who are required to complete VAT returns quarterly and pay the relevant tax due. Problems with payments can arise if cashflow levels are always lean and a business must pay HMRC for VAT owed before it is actually paid by the customer. In this case, do remember there is a cash accounting VAT scheme that may help.
To be able to use the online time to pay arrangement facility, the following conditions must have been met:
• Latest VAT return must have been filed (but the payment may be outstanding)
• Amount owed to HMRC is £20,000 or lower
• Request for extra time to pay is made within 28 days of the payment deadline
• No other existing time to pay agreements are already active
• The business does not have other debts with HMRC
• The repayment term sought is six months or less
It is possible to access the online time to pay VAT facility through the government gateway.
If you are unsure about whether this scheme would be beneficial it is worth speaking with your tax advisor.
During the Covid pandemic there was a scheme available that allowed VAT return payments to be deferred between March-June 2020. Thereafter, taxpayers could opt into a form of time to pay agreement, but this was a one off scheme. It is worth noting that the rules that applied to this special scheme do not apply to this new online time to pay VAT process, which is simply moving the standard time to pay facility online
As tax advisors who specialise in small and high growth businesses, one risk that exists with these new easy access time to pay agreements is that they may be masking some other underlying problems that impact cashflow. If you regularly face difficulties paying your VAT bill at the quarter end, it is worth asking your accountant or tax adviser to examine why and find ways to overcome the issue. Time to pay is very helpful but should never be regarded as a quick fix to a bigger business issue.
To discuss your business cashflow, VAT returns or any other aspect of business tax and accountancy, please contact us via partners@rjp.co.uk.
I wanted to write and express our gratitude for your help and hard work in getting Probate through and settling all the taxes. I am so pleased that we selected RJP, as your professional help and updates throughout this process have been invaluable. If at any time in the future Probate assessment may be needed, you will be our first port of call. Once again, many thanks to the whole team.
Dan Cook, Probate clientI just wanted to drop you a short note to say how grateful I am for the support that RJP has provided over the past 4 weeks while our Financial Controller was away. I struggle to comprehend how much work your staff get through during their weekly visits and they are always a pleasure to have around the office.
I Evans, CFO, MoblicitiJust a quick e-mail from me to thank you for achieving the target for producing the draft accounts – it is very much appreciated and gives a first class impression of your firm. Many thanks.
J Stanfield, Chairman, BBS Actuaries LtdI would like to take this opportunity to thank you very much for the amazing job you have done navigating us through this whole process. My family and I also really appreciate the care and compassion demonstrated by you and your team in every dealing. Our thanks to everyone.
M Goldsmith, Probate ClientRJP provide our company with a complete service which takes the stress and strain away from the day to day running of our accounts! Their understanding of our business and their patience and advice is invaluable.
Outsourcing Client
If you sell a property and incur capital gains tax on the transaction, you will need to file a tax return and also pay any tax that is due within 60 days of completion, or penalties will arise. Need help with your property taxes? Talk to us.