NASDAL: “Beware 31st January tax pitfalls”News
Posted by: The Probe 14th July 2020
Last week saw the Summer Economic Statement delivered by the Chancellor of the Exchequer. Rishi Sunak concentrated very much on job support, job creation and job protection with temporary tax reductions targeted specifically at the hard-hit hospitality sector and at the sluggish residential property market.
There was relatively little of direct relevance to the dental sector and Charles Linaker, a tax partner with NASDAL members UNW, says that the most important Covid-19 measure of which dentists need to be aware is a measure announced previously in relation to their 31 July payments on account due under Self-Assessment.
“The majority of dentists will have had average earnings above the limits which might have rendered them eligible for help under the Self-Employment Income Support Scheme and so, for them, the main measure of relief is the opportunity to defer their second payment on account for tax year 2019/20, due at the end of July, until next 31 January 2021, which was brought in as a response to Covid-19. By now, most dentists should have received their Self-Assessment statements from HMRC showing that their 31 July payment has been deferred automatically to 31 January 2021.
This has been done so that HMRC’s IT systems do not automatically charge late payment interest on any 31 July 2020 payment on account paid between 1 August 2020 and 31 January 2021. In other words, while it remains an option to make the payment as normal, should dentists choose not to, so as to preserve cash at this uncertain time, they need take no action to inform HMRC and will not be at risk of interest or penalty charges so long as the amount has been paid by no later than 31 January 2021.”
Linaker continued, “of course, it may be argued that deferring until 31 January 2021 is doing no more than putting off the evil day and that there will then be a doubling up of tax payments, because the first payment on account will then be due for tax year 2020/21. But that is to overlook the fact that there is a long standing facility, of which many dentists may never have needed to take advantage previously in their professional careers, to make a claim to reduce the 2020/21 payments
on account for 31 January 2021 and 31 July 2021, on the grounds that current year profits for 2020/21 will be reduced significantly compared to those for the preceding year 2019/20. Given the timing of lockdown as a result of Covid-19, this is likely to be a facility which many dentists will want to make use of and they should ensure they liaise with their accountants well before 31 January 2021, so that appropriate calculations can be made to justify a claim to reduce their 2020/21 payments on account.”