Much remains up in the air regarding the government’s package of measures to support businesses during the Covid-19 outbreak. However, one measure that could significantly help limited company contractors is the announcement that VAT and Income Tax payments due between now and the end of June will be deferred for three months.
This means that no VAT registered business will have to make a VAT payment normally due with their VAT return to HMRC during this period. Income tax payments due in July 2020 under the Self Assessment system will be deferred to January 2021, benefitting up to 5.7m self-employed businesses.
Unveiled by chancellor Rishi Sunak on Friday, the income tax deferral scheme is part of a multi-tier, billion-pound package of emergency measures to help firms during the outbreak. The following relief measures were laid out:
- If you’re self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021 – this applies to contractors, consultants and freelancers with PSCs
- For VAT, the deferral will apply from 20 March 2020 until 30 June 2020
- VAT deferrals – you MUST still submit your VAT returns as normal, but businesses will not need to make a VAT payment during this period
- Contractors should bear in mind that these are deferrals only and the balance will still need paying – if you’re in a position to pay, this may be advisable
- No penalties or interest for late payment will be charged in the deferral period
- Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period
- VAT refunds and reclaims will be paid by the government as normal
- These offers are automatic offer with no applications required
Customers taking up the offers are reminded to cancel their direct debit with their bank, so that it is not automatically processed when they submit their VAT return.
HMRC have also scaled up their Time to Pay offer to all firms and individuals who are in temporary financial distress as a result of Covid-19 and have outstanding tax liabilities.
This content has been supplied by IR35 Guru.
ContractingWise has a range of options to help you keep your contracting career on track. To talk to a member of our team, call: 0203 642 8679