Client Can't Pay Their Self Assessment Tax Bill? All Is Not Lost

1st Jan 2021
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If your clients are struggling to pay their self assessment bill by the 31st January, there are a couple of options available. Read on.

A common problem

COVID-19 has plunged vast swathes of UK businesses into unprecedented financial hardship. And with the self assessment deadline of the 31st January fast approaching, many are discovering they haven’t got enough money to settle the bill. This year, businesses and self employed individuals were also offered the chance to defer their July 2020 payments, rolling them over to January 2021. But with coronavirus restrictions rumbling on, a number of your clients will be suffering a financial hardship double whammy if they still can’t pay.

It’s around about now that clients are approaching their accountants to ask for help. It’s a stressful time, and many will be panicking. But there are some things they can do.

Offer a payment proposal

With HMRC adding interest on every day a payment is late, time is of the essence. A good place for your client to start is by approaching HMRC and suggesting a payment proposal.

They must have all the evidence to hand as to why they’re not able to pay. Comprehensive income and expenditure records are essential, but they’ll need to be realistic. HMRC is under no obligation to accept a payment proposal, although the chances are much better if the amount is not too low. They will likely also ask if there are any savings or assets in the business that could be liquidated to settle the amount outstanding.

Of course, pre-coronavirus many businesses were thriving, and will continue to do so once the pandemic passes. If the reason your client can’t pay is simply down to cash flow issues - and their previous payment history is otherwise good - then HMRC may allow extra time for them to pay. This is called a Time to Pay arrangement. The most up-to-date details on this can be found on the government’s webpage: Difficulties paying HMRC. There’s also a helpline at 0800 0159 559.

Claim every tax relief possible

There are many tax reliefs that business owners haven’t heard of - but now is the time they can make a huge difference. The most well-known of these perhaps is the personal allowance, currently set at £12,500 for basic rate tax payers.

Don’t forget, if your client’s company has also engaged in any innovative R&D projects lately, then R&D Tax Credits could be due too. Offered by HMRC as a way of incentivising growth, R&D Tax Credits are awarded to profit-making companies as a reduction in their Corporation Tax. This reduction reflects a certain percentage of the R&D costs they’ve incurred, and for SMEs is worth up to 33 pence in every £1 of R&D expenditure.

Costs covered include staff wages, subcontractor costs, materials, certain software, overheads and much more. Loss making companies can benefit too as the credit can be received as cash payments instead.

We’ve recently put together a blog article for accountants called Easy Mistakes That Accountancy Firms Make Regarding R&D Tax Credits which is well worth a read. More information can also be found on our R&D Tax Credits page.

Note: The limit for Time to Pay has increased

From the 1st October 2020, those who are subject to self assessment can apply online to pay their tax bill in monthly instalments, without having to make contact with HMRC.

The threshold to do this has also been increased. Prior to October, online payment plans could be set up to pay tax liabilities up to £10,000 in monthly instalments. However, that figure is now £30,000. It’s hoped that this will further help businesses that are struggling due to the coronavirus pandemic.

This increase in the self-serve Time to Pay limit up to £30,000 follows Chancellor Rishi Sunak’s pledge made on the 24th September to help businesses and individuals through the challenging times ahead. Find out more.

Why should accountants work with the R&D funding specialists at Myriad Associates?

As a competent, caring accounting professional you’ll already have substantial knowledge around how to help clients out of their financial fixes. But at this time of year particularly there’s a huge amount on your plate, and R&D Tax Credit claims are the last thing you need.

At Myriad Associates we specialise entirely in R&D Tax Credits, grants and other R&D funding streams. We have also spent many years building and nurturing strong working relationships with accountants up and down the UK and Ireland to benefit both firms and clients. This means that accountants themselves can provide a more complete R&D tax relief service with full support from our team.

The fact is that R&D Tax Credits, as well as other tax reliefs like Patent Box claims, VGTR and Capital Allowances, are extremely complex. Rules and guidelines around claims eligibility and qualifying costs also change regularly. It’s not something we advise tackling alone, although most accountancy firms don’t have an R&D funding team in house. This is where our independent, flexible support is ideal. We do everyone via video calls, emails and phone calls too, so no need to come to us.

The R&D experts at Myriad Associates will work with you on all R&D claims from beginning to end, and our 100% success rate speaks volumes.

Referral fees

The Tax Cloud portal for accountants is the fast, easy way to submit your clients’ R&D Tax Credits claim on their behalf. And, should you choose to use this service, we offer a generous partner package too.

The fee is derived from a 30% revenue share model. So for an example, if your client's qualifying R&D expenditure is, say, £100,000, their Corporation Tax Savings (CTS) will be approximately £24,700. Then deduct the Tax Cloud fee (5% of CTS, so £1,235 in this case), so your share will then equal £370.50 (30% of £1,235).

Many of the firms who work with the Tax Cloud portal have also benefitted from commission payments just for being an introducer. Indeed, introducer partners will receive a 15% referral fee of the net invoice.

Get in touch

Simply call us on 0207 118 6045 or send us a message so we can get back to you. Throughout the pandemic we’re working remote