I am self employed and am currently due to pay around £4250 tax on account in July for tax year 2011/12. (I have already paid around £4250 for the same tax year in January 2012)I have still not received monies for a March Invoice from tax year 2011/12, neither have I received any monies from invoices from April, May or June to date therefore money is quite tight.Would I be able to postpone the payment on account until January 2013?If so how would I go about it?Are there any pitfalls when doing this?Thanks
System of Law: England-and-Wales
First Port of Call
Hi.If you think your 2011/12 profit will be less than that for 2010/11 on which the 2011/12 payments on account are based you are quite within your rights to call the tax office and ask them to reduce them to a more appropriate level. So, for example, if you reduced them to £2,125 each you would have nothing to pay on 31 July 2012 as you have already paid £4,250. If you reduced them to £3,000 each, you would have £1,750 to pay on 31 July 2012.Strictly, you are not supposed to reduce the payments on account to a level which is actually too low but many people do to ease cash flow problems. If, when the final liability for 2011/12 is established, it is clear that you have reduced the payments on account by too much, you will have to pay interest on the late paid tax but that is only 3.5% per annum. You have until 31 January 2013 to submit your 2012 tax return online so the Revenue will not be aware of your final liability until the time that you submit the return.If you don't want to reduce the payments on account, call the Business Payment Support Service on 0845(NNN) NNN-NNNNand try to agree an instalment plan with the tax office. You can read about how the BPSS works here. If you cannot agree a payment plan, just pay what you can when you can.Let me know if you have any further queries.
Inc Tax, CGT, Corp Tax, IHT, VAT.
Thanks TonyI understand everything you stated except one point.At the end of the final paragraph you stated:'If you cannot agree a payment plan, just pay what you can when you can.'Do you mean just pay the revenue a lesser amount than they are expecting?What would the ramifications of this be? (Penalties/Fines/interest etc)Thanks
I have had many self-employed clients who never pay the full instalment on time but as long as they make regular payments that eat into the overall liability they are left alone by the tax office. Interest is charged on late payments but at 3.5% per annum its cheaper than an overdraft or a loan. Any tax for 2011/12 remaining unpaid at 28 February 2013 will attract a 5% surcharge and then the penalties gradually ratchet up. Take a look here for information on the new penalty regime.
What would you class as regular payments eating into the total liability?Suggest: £1500 by 31st July then £1000 every other month thereafter until cleared (whilst incurring the 3.5% interest payment?Clearly I'm speaking hypothetically and not asking you to state what you would definitely advise.Thanks
If you offered to pay those sums on that time scale, the tax office would almost certainly accept your offer unless you have a record of persistent late payment in the past. You just need to try to keep on top of it and not run up against the next payment date still owing tax from an earlier one. There is nothing to stop you trying to get ahead when cash flow is better to make one off or monthly payments to your tax account as if you were on PAYE.
Thanks TonyI'd press the accept button but it appears to have disappeared.
You should see it now.TonyTax41083.276647338