HMRC Time To Pay Arrangements – All You Need To Know

HMRC Time to Pay arrangements overview

If your business is struggling to pay its corporation taxes, PAYE or VAT, an HMRC Time to Pay Arrangement is a way of giving it more time to pay them back.

The ability to pay taxes such as PAYE and VAT is one of the first things directors fall behind on when a company is facing problems with cash flow.

Depending on your condition, negotiating time to repay what you owe may be possible and this is referred to as a Time to Pay Arrangement.

 

 

What does a Time to Pay arrangement do?

With an HMRC Time To Pay arrangement (TTP), you can repay debts to HMRC in monthly instalments, usually over a time frame of twelve months.

However, some Time to Pay arrangements may take longer periods depending on the circumstances facing your business and affordability, some arrangements have been for up to 36 months.

It’s advisable you seek help as soon as you can if you have difficulties paying your tax bill, or you are anticipating that your company may find difficult to meet up with tax obligations in the future.

 

 

Paid alongside new tax debt

It is worth noting that this payment will have to be made alongside any new or current payments to HMRC and you should bear this in mind when you’re looking at whether you can afford the plan.

It is also important and helpful that you have a little knowledge on the process involved in a TTP arrangement before diving into it as a way to bring your debt payments up to date, as well as the possibilities of HMRC actually accepting a TTP arrangement.

 

Negotiating a Time to Pay arrangement with HMRC

If you need additional time to pay your debts, you can negotiate the likelihood of this with HMRC.

They usually prefer initial contact through a telephone helpline, but in most cases, you will have to provide your actual repayment offer and case in written form, alongside copies of your cash flow forecast.

You will be also required to explain why you cannot pay the amount owed, as well as the amount you can offer as a monthly payment.

When requesting for more time, being honest about the amount your organisation can afford is very important, ensure you don’t exaggerate this figure.

It can help to use a professional service who can do the negotiating on your behalf if you are unsure of what you need to do, we can offer some free advice on 0800 975 0380

 

You need to keep to the plan

HMRC will not accept a Time To Pay arrangement unless they are certain that your company can keep up with the payments (remember you will still need to pay your current tax as well as the outstanding debt); you offering to pay more than you can afford will send a red flag, which will probably lead to rejection of your proposal.

When you contact HMRC via a call, they will also assess the long-term viability of your company and the probability of a successful TTP plan.

The person interviewing you will use this call to inform and advise you of your rights and likely penalties if you go against the arrangement or provided wrong or false information in any way.

During your call with HMRC they may ask you about:

• about any other debts the business owes HMRC
• about any tax repayments owed to the business
• for information about the business’ financial position — including how you expect the business’ finances to change in the future
• what efforts have been made to raise the funds against the business’ debt
• what has been done to try to pay the tax bill
• what the business has done or is doing to get its tax affairs back on track and to afford repayments
• for the business’ bank account details, so that a Direct Debit can be set up (the caller will need the authority to set up a Direct Debit on that account)

 

How much time will I get?

The ongoing viability of the company in question is the first thing HMRC will look into when considering a Time To Pay arrangement.

They know it’s normal for businesses to experience cash flow problems once in a while, even well-run firms. So HMRC is willing to give listening ears to businesses facing genuine financial challenges who have a good history of paying tax.

There is a defined period set for a TTP arrangement, but the time frame given varies from one company to another since each case is judged on its own merits.

 

Some time to pay arrangements are over a year

Given the circumstances at hand, you may be given a TTP arrangement that is more than one year; this is not very common, but it has happened.

In situations where your company needs a longer instalment plan, there could be other more suitable recovery options available such as a Company Voluntary Arrangement or if the situation is unrecoverable a Creditors Voluntary Liquidation.

If you think that you may need more than a year to pay back the debt, then get in touch with us today on 0800 975 0380

 

 

Can the TTP agreement be broken by HMRC?

According to law, HMRC cannot break Time to Pay arrangements agreed to except under exceptional situations. HMRC do have the power to withdraw a TTP if there are any changes in your corporation’s condition, which makes it unfit for a TTP plan.

It’s crucial that you are completely honest about your company’s situation, and if HMRC gets to know that you misled them or falsified information in any way when applying for a TTP, they can terminate the agreement; this happens often.

HMRC can also break the agreement if you default on your instalments, and of course, they can reassess the level of risk involved if your situation worsens.

 

Only for companies with a future

Don’t forget, Time to Pay Arrangements are only for companies that are temporarily distressed financially but have future viability.

Thus, any outstanding TTP agreement may be cancelled if your company is wound up by a creditor or if your company is on the verge of becoming insolvent.

A TTP arrangement could make a big difference when it involves the ongoing viability of the business if your company problems are associated with an outstanding HMRC tax debt.

However, depending on the company’s financial condition in general, a TTP arrangement may not be the right solution for every situation.

Having an alternative recovery plan may be more suitable if debts owed are large or there are creditors besides HMRC.

 

The usual requirements of Time to Pay arrangements

The total amount of tax your company owes does not reduce when you enter into a Time to Pay Arrangement; a TTP arrangement only gives room for you to pay up in instalments. Here are some key TTP guidelines you need to know before making the call:

• You will have to provide a realistic proposal regarding the amount they can afford over a particular time frame.
• HMRC needs to be convinced or satisfied that you don’t have the means to meet the tax due date.
• The instalments will need to be paid over the shortest time frame reasonably possible.
• A TTP arrangement is to give companies experiencing short term cash flow problems more time to make payments and not for companies wishing to use the money somewhere else.
• If the financial circumstances of the company changes in any way, either positively or negatively, HMRC must be notified immediately.
• The decision by HMRC is based on risk, so they may need additional information before arriving at a conclusion if there is a greater amount of risk.

Remember, that the main requirement to be granted a TTP is that your company cannot pay taxes owed at the appropriate time. This is the only reason what will make HMRC agree to a the arrangement.

Going into a TTP arrangement with HMRC will ensure you are free from late payment penalties imposed on customers or companies by HMRC who fail to pay their debt on time. However, you will be charged interest on the amount of outstanding tax.

 

How Forbes Burton can help you if you are struggling with HMRC tax arrears

If your company is behind with paying HMRC, we can advise you if a TTP arrangement is a good option and help you put one into place with HMRC.

Time to Pay arrangements may be a viable option for tax arrears, but there are other alternatives you can explore that maybe more suitable.

You can contact us on 0800 975 0380 for free advice on whether a TTP is suitable for your company.

Or, you can find out if you qualify for a Time To Pay Arrangement with our quick online HMRC Time To Pay Arrangement Test →

We can also offer complete support and advice on any matter that has to do with your company’s financial problems.