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GPs due to make a second tax payment on account for 2019/20 by 31 July 2020 may be able to defer that payment by up to 6 months. While no application is required and the deferment is automatic, HMRC has clearly stated that where a taxpayer is able to make the payment by 31 July 2020, they should do so. Whether or not the deferment applies will therefore depend on whether the individual experiences difficulty in making a payment on 31 July, and if this difficulty was caused by the Coronavirus.
Where the deferment applies, no interest or penalties will arise as long as the payment reaches HMRC by 31 January 2021. During the deferral period you can set up a budget payment plan to help you pay the deferred payment on account before 31 January 2021.
Where taxpayers are having difficulty paying tax liabilities it has always been possible to seek a Time to Pay Agreement (TTPA) with HMRC. During the current lockdown, HMRC has been extremely accommodating to such requests - only asking for minimal information. However, that approach will change from 30 June 2020: HMRC is reverting to its usual position of seeking detailed financial information to support a TTPA request.
A TTPA does not operate in isolation. For example, if a medical business has a separate private practice that is in financial difficulty, HMRC may be reticent about deferring tax if another business under the same ownership is doing well. While businesses receiving public funding are not expected to claim under the Coronavirus Job Retention Scheme, some private medical businesses may have been able to claim. In such cases, HMRC will expect the PAYE and NIC due on furlough payments received to be paid.
Pension tax election deadlines
It is now well known that pensions contributions made for (and by) GPs can trigger a tax charge to clawback tax relief because of their level of annual earnings. Where a charge arises, it can be paid direct, or the individual can elect for it to be paid from their pension fund – the ‘scheme pays’ option.
Although the scheme pays option is often the simplest solution for many GPs, it is important to remember that there are time limits for making the election. Fortunately, the deadline for making a scheme pays election for the 2018/19 tax year has just been extended from 31 July to 31 October 2020 (due to the COVID-19 outbreak).
In most cases at the time that first claims are submitted they have to be provisional as often GPs do not have pensions Annual Allowance statements from NHS Pensions in time to make final claims. Therefore, many GPs have provisional elections for earlier years to be finalised. The government allows revisions to the amounts payable under scheme pays elections to be made by 31 July four years after the relevant tax year: for example, revisions to scheme pays elections for the 2015/16 tax year must be made by 31 July 2020.
Please contact our team for help and advice on the financial implications of the COVID-19 outbreak on your GP practice.