As the UK is bracing for the worst impact of Coronavirus, a financial crisis seems to be all but inevitable.
According to the Centre for Economics and Business Research, the UK economy is set to face the deepest recession since the financial crisis of 2008. The economy is predicted to shrink to a stumbling 15% in the second quarter as the pandemic, and the consequent lockdown restrictions scourge the businesses.
The continuing spread of Covid-19 is presenting an unprecedented dilemma to many of the business markets concerning their short and long-term futures.
On the upside, Boris Johnson’s government is preparing for the worst and has announced emergency measures to help businesses overcome the financial downturn and provide some relief during these uncertain times.
Among the policies revealed by Chancellor Rishi Sunak, HMRC’s Time to Pay arrangement would be immensely helpful for all businesses facing distress.
What is HMRC Time To Pay agreement?
If your company is experiencing cash flow problems, then paying taxes such as VAT is indisputably a primary concern. In a usual scenario, a late payment would flag the HM Revenue & Customs and would have further consequences.
However, amidst the Corona crisis, one of the most effective measures in the 2020 Budget is to implement the Time to Pay arrangement with HMRC. A TTP arrangement allows businesses to pay back the taxes to HMRC in monthly installments. Depending on the business circumstances, the period of payments would differ.
Support for Businesses during Coronavirus
To ease the burden on affected businesses, the government is offering support for companies and self-employed individuals who might not be able to pay their tax. It is important to note that each agreement is negotiated on an individual basis, and the benefits you receive would be tailored to your liabilities and circumstances.
The HMRC’s Time to Pay arrangement applies to three possible scenarios.
- If you cannot pay VAT because of Coronavirus, you can postpone any VAT payments due between 20 March and 30 June 2020. You will have an extended time until 31 March 2021 to pay the VAT. There will be no interest or penalties for late payment during the deferral period.
- If you cannot meet your Self Assessment tax bill, then you might be able to pay in installments if you have filed your return and owe less than £10,000.
- If you cannot pay other taxes, such as a tax bill, contact the Payment Support Service. If you have already received a letter with legal action, contact the HMRC office that sent you the letter.
What to Do?
In case you are facing difficulties to pay the tax bill or foresee yourself struggling to be able to accommodate your future tax obligations, then you should contact HMRC at the earliest opportunity.
HMRC has set up a new dedicated COVID-19 helpline from 11 March 2020 to address your concerns. To guarantee ongoing support, HMRC has 2000 experienced call handles available to advise businesses and individuals when needed.
What to Expect?
The possibility of a Time to Pay arrangement will depend on the ongoing viability of your business. As time has proven, even well-oiled companies can experience cash flow problems amidst a financial turmoil, and currently, one that extends beyond the constraints of finances alone.
The chances of payment outside the period of 12 months are rare, but achievable under exceptional circumstances. It is essential to affirm your arguments with proper documentation and be honest about how much you can afford to pay monthly.
The advisors are more than willing to listen if you are in genuine financial difficulty, and businesses can and should take merit from the assistance offered. Simultaneously, consider other supporting facilities and business rescue packages provided by the government. These include access to emergency loans and lower interest rates for businesses facing fiscal strains.
The historically strengthened levels of government support, as both observed in Budget 2020 and anticipated in the upcoming Spending Review and Autumn Budget, are expected to redeem the country’s economy for the better in the future. Meanwhile, companies should be prepared to make difficult choices to mitigate the impact of Coronavirus on your business.