Key financial dates you should plan for in 2021
13th January 2021
Oliver Bond See profile
If you (or your accountant) are filing your Self-Assessment tax return online, midnight on 31 January is the latest you can do it to avoid a penalty.
The end of January is also the deadline for payments of Income Tax and National Insurance contributions. While these are personal liabilities, for most farmers it will be the business footing the bill, and so your future cash flow will need to be considered.
Many farmers have taken advantage of the Government scheme to defer the 31 July 2020 payment on account, meaning the amount of tax that will be due on 31 January 2021 may be correspondingly higher.
Whether or not you deferred the July 2020 payment, the January 2021 payment will be based on income in the tax year to 5 April 2020, most of which was pre-crisis, meaning last year’s income levels may well be higher than for the tax year ending 5 April 2021. It may be a good idea to reduce the payment on account that will be due in addition to the balancing payment for last year. Your accountant should be able to advise on this.
If it’s not possible to pay your tax bill from cash reserves, then you may be able to agree a Time to Pay Arrangement with HMRC, which will spread the liability over a number of months.
At the time of writing, the Government still intends to announce the Spring Budget on 3 March. If this is the case, then many expect the Chancellor to make a concerted effort to restock the Treasury’s coffers through tax reforms.
Certain areas of agricultural taxation (such as reliefs applying to Capital Gains Tax and Inheritance Tax) could be an easy target. The harshness of any tax reforms will likely depend on the state of the economy at the time, and given the recent lockdown restrictions imposed, it’s unclear how daring the Chancellor will be able to be.
Like many businesses, most farmers have taken advantage of the Bounce Back Loan Scheme (BBLS) loans that were available from Spring 2020. The one-year repayment holiday on these BBLS loans will soon be upon us for those who were early in applying last year, and businesses should expect for repayments to begin automatically from that point.
It’s worth remembering that BBLS loans can be repaid in full at any time without incurring charges.
One of the first COVID-19 measures announced by the Chancellor was the deferral of the VAT payment falling due during the lockdown period. This is not a cancellation but a postponement and any VAT payments deferred are due for payment by 31 March 2021.
Since then, it has been announced that businesses can opt into a new scheme which will mean that this VAT liability doesn’t have to be settled on 31 March 2021, but instead can be repaid in instalments over the period to 31 March 2022 (without incurring interest). Note, where the original deferral was automatic, if you wish to pay your deferred VAT by instalments then you must opt-in for the scheme.
While the agricultural industry is relatively unaffected by COVID-19 directly, and while most farming businesses will be reclaiming VAT rather than paying it, we may see many suppliers suffering cash flow issues.
Traditionally, quarterly land rents are payable by 25 March, 24 June, 29 September and 25 December; if your forecasts indicate that these dates could be a problem for your business, now might be the time to start negotiating with your landlord. A switch to monthly rental payments would help to smooth your cash flow.
Last year, in a bid to keep the housing market buoyant, the Chancellor increased the threshold for Stamp Duty Land Tax (SDLT) to £500,000. This should benefit most house buyers, including landlords and second-home owners (although the 3% surcharge for these properties remains in place). The temporarily increased threshold is expected to end on 31 March 2021.
SDLT can add many thousands of pounds to the cost of residential property and so this temporary change could save house buyers a lot of money. Of course, it’s important to consider your financial situation before buying additional properties.
The Rural Payments Agency (RPA) deadline to submit claims for the Countryside Productivity Small Grant (CPSG) scheme has been extended to the end of May 2021. This is a key date for those who were successful in their applications for the third round of the scheme, but who haven’t yet claimed. If the deadline is missed, you will not have the opportunity to claim from the CPSG scheme.
The deadline for Self-Assessment taxpayers to make their second ‘payment on account’ of tax to HMRC is 31 July. This payment is normally based on your previous year’s tax liability – being 50% of the tax paid for the 2019-20 tax year. If you expect your income for the 2020-21 tax year to be lower, then it might be worthful discussing a claim to reduce your payment on account with your accountant.
However, beware that many taxpayers’ incomes may not fall significantly in the 2020-21 tax year owing to the receipt of (taxable) COVID-19 grants and income support scheme payments.
The RPA was remarkably successful in processing 2020 Basic Payment Scheme (BPS) payments in good time last year. Hopefully the same will be true for 2021 but farmers would be wise not to budget their cash flow on a timely payment being received every year! Of course, the reduction in BPS payments will begin with the 2021 claim and so farmers should expect and prepare for a percentage reduction – depending on the size of claim.
If you have any questions about any of the above please do get in touch with your adviser in the first instance, or alternatively click here…