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HM Revenue & Customs (HMRC) has updated its guidance to avoid any confusion and to make it clear that the deferral of payment on accounts applies to all self-assessment taxpayers and not just the self-employed. This includes individuals with investment and property income.
This means that any individual who was due to make a UK tax payment on 31 July 2020, now has until 31 January 2021 to make this payment. The tax payment due on 31 January 2021 will consist of the balancing tax due in respect of the tax year we are due to finish on 5 April 2020, plus the first payment on account towards the new tax year 2020/21.
This is an automatic deferral and no application is required to HMRC. No penalties or interest for late payment will be charged in the deferral period. The tax payment due on 31 January 2021 will therefore consist of the balancing tax due in respect of the tax year we are due to finish on 5 April 2020, plus the first payment on account towards the new tax year 2020/21. Some taxpayers may wish to still make the payment due in July in the normal way if they have the money set aside, and to avoid a large payment in January 2021.
Subject to income levels in the next tax year and the knock-on effects of Coronavirus, UK taxpayers may wish to review their payments on account for the tax year and whether there is scope for a reduction and include a claim in their 2020 tax return. Any UK taxpayer who wishes to defer payment needs to cancel any direct debit set up for this payment on account (direct debits for self-assessment payments on account are specific to each payment).
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While the IRS have released a number of reliefs relating to COVID-19, US citizens need to be aware that there are no reliefs relating to the Foreign Tax Credit (FTC) provisions.
US taxpayers who are on the ‘paid’ basis for FTC purposes should speak to their client service team about the timing of their 31 July payment on account. In most cases, it will make sense to make this payment, and possibly the remainder of your 31 January 2021 payment, on or before 31 December 2020. This is to ensure you have sufficient FTCs in place to utilise on your 2020 US Federal income tax return.
Subject to an individual’s income level in the next US (2020) and UK (2020/21) tax years and the knock-on effects of COVID-19, individuals may also wish to review their payments on account for the tax year to determine whether there is scope for a reduction and include a claim in their 2019/20 UK tax return.
This article was last updated on 3 April 2020.
If you have any questions or would like advice regarding your upcoming tax payment either on your personal affairs or on behalf of your business, please get in touch by speaking to your usual Buzzacott contact or by completing the form below.
Tax planning and advice for individuals
1
Expatriate tax
2
Responding to the impact of COVID-19
The effects on tax residence due to Coronavirus
Optimising VAT to minimise the impact of COVID-19
Automatic extension to the US tax filing and tax payment deadline
