Tax deferral can ease cashflow headaches

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Business owners struggling with cashflow because of the economic downturn are being reminded that they can defer payment of some taxes for as long as three years.

The reminder comes from Truro-based business advisers and chartered accountants Winter Rule, who have been helping local businesses to take full advantage of the deferral scheme since its introduction last November.

Winter Rule tax partner Peter Penneycard said: “Cashflow is the most pressing issue for businesses at the moment but the good news is that the taxman does have a heart and is prepared to help, at a reasonably competitive rate.

“For businesses in genuine difficulty who are unable to pay their tax on time but are likely to be able to pay if given a breather, they can enter into a ‘time to pay’ arrangement with HM Revenue & Customs (HMRC).

“This can cover personal income tax, corporation tax, PAYE, National Insurance, VAT or other amounts owed to HMRC and we understand that payment periods can last up to 36 months.

“What’s important is that businesses contact HMRC before they default on any tax and that once an agreement is made they stick to it otherwise failure to meet a scheduled payment could result in the total outstanding amount being payable immediately.”

Penneycard said HMRC would not impose additional penalties or surcharges on the tax within a time to pay arrangement, although interest would be payable on those taxes where it applied. For income tax, corporation tax and VAT that is currently 3.5%.

He said it was advisable to seek written confirmation from HMRC of any agreement entered in to, and that all tax returns should still be submitted in the usual way by their due dates.

HMRC has set up a dedicated Business Payment Support Service to help businesses looking to defer tax payments, which can be contacted on 0845 302 1435.