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As many of us look forward to some time off over the coming weeks, the arrival of reminders to pay HMRC the next payment on account by 31 July may have put a bit of a 'dampener' on the holiday plans!

By 31 July 2010, self-employed tax-payers are due to pay the balance of any income tax due for the year to 5 April 2009, so as to avoid any further penalties. If you have not paid all your income tax for that tax year, you will already have been hit with a 5% surcharge at 31 January; a further 5% will be levied on outstanding amounts at the end of this month, and the interest clock will start ticking at the current rate of 5%.

A second payment on account for the tax year to 5 April 2010 is also due for self-employed persons at the end of this month. The amount of the payment will be based on your tax return for 2008/09. For many taxpayers, income in 2009/10 will have been lower than the previous year – it may well be worthwhile looking at the payment on account due and seeking to have this reduced based on reduced profits in the 2009/10 tax year.

In the event that you do have a liability, and you are unable to pay, then the Revenue’s Business Payment Support Service may be willing to offer you time to pay the amount due. This scheme was widely welcomed when it was introduced back in November 2008. Over the past 18 months, some £5bn of payments have been deferred; but as time has gone on the Revenue’s stance appears to have toughened. Where there are genuine circumstances, however, agreement can usually be reached subject to up to date tax returns being submitted, evidence of financial difficulties, confirmation of no alternative sources of finance and, critically, a repayment plan of less than 12 months (a longer period will only be agreed to in exceptional circumstances).

It remains to be seen how long this scheme will remain in place – the Government in their recent budget announced the continuance of the scheme – as the belt tightens, one has to wonder how long they will be willing to bail out businesses!

The end of the month also triggers the final deadline for renewing tax credits. Anyone who has been sent a renewal pack in the past month or so must complete the pack and provide details on their income and circumstances for the 2009/10 tax year – otherwise payments may be stopped.

Again, reductions in income in the past year can mean that those who were not previously eligible for Tax Credits due to the level of ‘household income’ and ‘size of family, may now in fact be able to claim some of these credits – for those experiencing a sharp drop in their weekly income, tax credits could be a welcome lifeline!

Gerard Gildernew is Partner in CavanaghKelly and can be contacted at Gerard.Gildernew@cavanaghkelly.com

Have you a question you would like answered? If so, please email us to businessreport@cavanaghkelly.com