Deferral of SA POA is for ‘COVID affected’, reminds ICAEW

16 July: The second self assessment (SA) payment on account (POA) for 2020/21 is due on 31 July 2020, however, deferral is an option for those impacted by coronavirus. ICAEW’s Tax Faculty highlights what taxpayers and agents need to consider.

HMRC’s guidance on deferring the second SA payment on account, which was updated on 8 July 2020, has been somewhat muddled.

The original policy announcement suggested that the deferral would only be available to those who are self-employed. This changed quite quickly and HMRC made it clear that the deferral is available to all taxpayers within SA, including those that are not individuals, such as trusts.

The likely reason for the policy being extended to all taxpayers was to ensure that entitlement would be automatic, avoiding the need for HMRC to administer an application process.

HMRC’s guidance states that deferral is available to any SA taxpayer who is: “finding it difficult to make your second payment on account by 31 July 2020 due to the impact of coronavirus”. This introduces a condition of the taxpayer’s ability to pay having been affected by the pandemic.

Many advisers and taxpayers have been surprised to receive SA statements of account which show the due date for the second payment on account as 31 January 2021. This is because  HMRC has had to change the due date in its system to ensure that interest would not be charged where payment is deferred until 31 January 2021.

However, this means that the statements give the incorrect impression that there is no condition to be met which is not the case. It may be that in practice HMRC will not have the resources to check compliance with the condition that the taxpayer must have difficulty paying, but the condition does remain in place.

In many cases what may be the most important consideration is that the taxpayer does not accumulate debt and, however well forewarned by their adviser, find themselves unable to pay a much larger than usual SA bill in January 2021.

Some members have told the Tax Faculty that they are advising clients to make the payment on account in July, where possible. The underused option of a budget payment plan may be a solution for some.