Tax payment on account: budget for a larger than expected payment in January 2020

16 Apr 2019

farm gate

Saffery Champness has found that some farm and estate clients have received automatic refunds of payments made in January on account of income tax for the 2018-19 tax year. It transpires that this is because HMRC’s system has not been set up to accept the first 2018-19 payment on account for some taxpayers.

Saffery Champness has also had confirmed that HMRC will not request payment of these amounts, which may now incorrectly be showing as late on some taxpayer’s accounts. Instead, HMRC has said that it will collect the underpaid amounts as part of any balancing payment in respect of the 2018-19 tax year and due for payment by 31 January 2020. Interest will not be charged on these underpaid amounts.

Martyn Dobinson, a partner and a member of Saffery Champness’ Land & Rural Group, says:

“It’s common sense that those who have received refunds in error should now budget to make these payments in the future. Unfortunately, this is not an unexpected windfall. Where unpaid payments on account have arisen from this issue, any interest demanded by HMRC should be challenged. Where there has been a genuine underpayment or late payment, interest and penalties may be due. A conversation with your adviser is a good move in either circumstance.

“Also, given the potential for delays in receipt of the Basic Payment for 2019, January 2020 cash flow could be tight for many farming businesses. It would therefore be wise to factor these tax payments into the business cash flow now, or, better still, if the funds are available, get the outstanding tax bill paid.”

Note:

Income tax payers required to make payments on account will normally make these as follows:

  • First payment on account by 31 January falling in the tax year.
  • Second payment on account by 31 July falling after the end of the tax year.
  • Any balancing amount by 31 January falling after the end of the tax year.
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