If you are having problems paying HMRC your business taxes, you may be able to agree a Time to Pay arrangement so you can pay the tax over a longer period of time.
In this concise guide, we walk you through HMRC’s Time to Pay Arrangements, explain what you should understand before contacting HMRC, and share some practical tips on how to make the most of Time to Pay;
What is a Time to Pay Arrangement?
Put simply, a Time to Pay Arrangement (TTP) is an agreement between your business and HMRC that enables you to pay taxes that are due, over an extended period of time.
Rather than your business having to pay the full amount of tax on the due date, you can instead pay the tax in instalments over a length of time stipulated in the TTP agreement. The length of time varies, but the majority of Time to Pay Arrangements stipulate repayments over less than six months.
When should a Time to Pay Arrangement?
You should use Time to Pay arrangements when your business is having temporary financial difficulties. An example of this would be where you are awaiting a large payment from a debtor that is overdue, and this has created a cashflow problem that will be resolved when the payment is received.
Time to Pay arrangements are not a suitable resolution where the company is having significant and ongoing financial difficulties.
Which taxes can be subject to Time to Pay Arrangements?
Time to Pay arrangements can be used for all taxes, but are most common for VAT, Corporation Tax and PAYE for companies.
When to Contact HMRC
Ideally, you should contact HMRC to negotiate a Time to Pay arrangement before the tax is due.
You can agree a TTP after the tax becomes overdue but it puts you in a weaker position and may make HMRC less likely to consider your proposals.
TTPs do not cancel HMRC penalties, so you will still have to pay these if the tax becomes overdue.
How to Contact HMRC about a Time to Pay Arrangement
HMRC have stated that they prefer for Time to Pay applications to be made by telephone (the number is 0300 200 3835). Their argument is that they can get the information necessary for making the decision speedily and ask as many follow up questions as they require.
Ensure that you are well prepared for the conversation. That means being able to discuss what has happened to create the current financial difficulties and also having cash flow forecasts to show how the company will be able to meet the payments (as well as future tax liabilities).
Be clear about what the company can afford to pay as HMRC view breaches of Time to Pay agreements very seriously.
If you are requesting repayment over a period of longer than six months, you will need to make a very strong argument as HMRC are reluctant to agree TTPs for extended timeframes.
How do HMRC decide on your TTP Application?
HMRC will look at a number of factors when considering your application for a Time to Pay arrangement.
The main question they are trying to decide is whether you can’t actually pay the tax or if you can pay it but are trying to defer it for whatever reason. If it’s the latter, they will not consider your application – HMRC’s line is that if the company is in a position where it can pay the tax, it needs to do it when it becomes due with no exceptions.
If the company genuinely can’t pay the tax then HMRC will look at the causes of its current financial difficulties and when they are likely to be resolved. It will also consider the company’s history as a taxpayer, and whether it will be capable of paying taxes in the future in order to decide the application.
HMRC Time to Pay Arrangements: Contents and Conditions
The TTP agreement will be tailored to the circumstances, but it will always detail the amounts and name the taxes in respect of which the agreement has been made, and the instalment plan for the repayment of those amounts.
The TTP agreement will be subject to a number of conditions, the breach of which may cause HMRC to cancel it and demand full repayment of the remaining amounts due. Again, these conditions are tailored to the situation but will include:
- A requirement that you have fully disclosed all of the relevant information to HMRC (including all of the taxes due to them).
- Payment of the agreed amounts on the dates specified.
- An obligation for the company to report any changes to its financial circumstances to HMRC.
- An agreement that the company will pay all future taxes as and when they become due (to the extent that they are not already included in the agreement).
If you are having temporary troubles paying your taxes, Time to Pay arrangements can be a workable solution to help your company avoid penalties and maintain a good relationship with HMRC.
You should always ensure that you do not agree to repayment terms that are more onerous than the company can afford as HMRC takes breaches of TTPs very seriously.
About the Author
This guide has been written exclusively for ByteStart by Company Debt, one of the largest insolvency hubs on the web and a leading company turnaround and rescue practice.
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