HEREFORD Times, in its quest to promote and provide ongoing support for businesses in Herefordshire, has established an experienced "Business Clinic" to answer questions that any business in Herefordshire might have regarding the running of their enterprises in the county.

We invite questions on any subject and ask that they are forwarded to The Business Clinic, C/O the Editor at The Hereford Times, Holmer Road, Hereford HR4 9UJ, or by email to Fiona.phillips@herefordtimes.com.


The Business Clinic is here to help and our aim is to offer practical advice based upon many years experience, although specific questions on company accountancy and law can be dealt with by

Richard Morgan,  is head of Commercial Litigation at Harrison Clark Solicitors, and head of their Hereford office.  He is also a Deputy District Judge.

Tom Morgan, is a Partner at Baker Tilley accountants in Hereford, with extensive experience of business tax and finance issues.

John King, is an entrepreneur with numerous business interests and many years of experience both as a businessman and as a business consultant.


This month’s question follows.


Question:  I am self-employed and needed to pay my second payment on account for 2011/12 on July 31. I cannot meet the payment on account that is due.  My profits will be lower this year and therefore I expect my tax bill will be lower. Is there anything I can do?


Answer: Tom Morgan says:  Yes, there is.  The starting point for calculating the payment is the previous year’s tax liability.  Clearly this is likely to be different to the actual amount due.

If you believe that you would otherwise overpay tax you can make a claim (HMRC form SA303 or by using the online facility) for the payment on account due on 31 July 2012 either not to be paid or to be reduced.  Given you think your profits will be lower, it appears this would apply. 

You do need to take care when working out what the reduction to the 31 July 2012 instalment should be.  If the final tax figures for the year show that all or part of the reduction in the payments on account should not have been made then interest will be charged on the shortfall from the original due date, that is, 31 July 2012.  In addition to being charged interest if you fraudulently or negligently reduce your payments on account then you may be issued with a penalty.

The best way to avoid uncertainty would be to complete your 2011/12 tax return now then you will know exactly how much is due.  If you use one, get your records to your accountant to complete this now. 

If you are in agreement with the amount due on 31 July 2012 but are unable to pay it due to economic difficulties then I suggest you make contact with the Business Payment Support Service (BPSS) at HMRC and request a time to pay arrangement.  If agreed, this normally allows businesses and individuals to repay the tax debt over a period which meets the individual/business needs.  Interest is normally charged on the late payment but surcharges and penalties can be avoided where the taxpayer complies with the agreement.