Should taxpayers automatically defer their 31 July payment on account? One of the first coronavirus extraordinary measures that the Government announced last month was that it was possible to delay making the 31 July 2020 self-assessment payment on account for 2019/20 to 31 January 2021. The knee-jerk reaction was that pretty much everyone should take advantage of this. But should they? Three important issues must be addressed.
Not everyone is suffering financially. Should taxpayers who are well able to fund the payment on account do the decent thing and pay it? Government guidance says payments can be deferred and refers to those who choose to delay.
Large businesses and partnerships run on a prudent basis may be able to fund the July 2020 payment, but should they preserve their funds lest the crisis runs on or in case recovery from the crisis takes longer than is to be hoped?
Tax liabilities relating to partnerships and LLPs are, of course, personal liabilities of the partners. The partners may already have seen a curtailing of their drawings or have had a cash call to fund business needs. They could be left with a further financial burden if the LLP decides to defer the July 2020 tax. If the LLP goes out of business prior to paying the tax on 31 January 2021, having lost the tax reserves held, the personal tax liability will remain for the partners. It may be that the LLP Members’ Agreement provides that the LLP pays the tax so should all consent to a deferral? What if not all partners agree to a deferral?
The issue of deferring tax due on 31 July may seem obvious at first, but the moral and business risk questions remain an important discussion to be had. With a few months to go until 31 July, getting that discussion underway early will avoid any rash decision at the last minute.