HMRC Time To Pay (TTP) Arrangements

What is an HMRC Time To Pay (TTP) Arrangement?

HMRC time to pay arrangements are structured payment plans for tax debt repayment over an agreed time period.

These agreements are reached between a business and HM and Revenue to provide more breathing space for a company experiencing financial difficulty and improve cash flow problems.

Understanding more about Time to Pay (TTP) and HMRC

Falling behind with payments to HMRC, whether PAYE, VAT or Corporation tax, is never a good idea. When HMRC starts chasing you and putting pressure on you, it’s easy to think there is no solution and insolvency is inevitable.

In many cases, this isn’t correct. HMRC are generally open to a payment plan solution and is keen for as many small and medium-sized businesses to survive as possible. The key to negotiating a time-to-pay arrangement plan with HMRC is good communication with them, providing detailed information, being consistent and transparent, and having experienced negotiators who know how HMRC operates.

HMRC does not always agree to payment plans easily, but equally, they recognise that in certain circumstances, businesses need help.

We are highly experienced in helping small businesses with time-to-pay arrangements, and because we specialise in working with small companies, our process is streamlined, and our charges are affordable. Please get in touch with us to find out how we can help you.

How Do Time to Pay Arrangements with HMRC Work?

HMRC’s supercomputer Connect picks up late payments these days and will send you an automated reminder notice. If you have received one of these and recognise your inability to pay, you should seize the opportunity to call them now to explain your cash flow problems and circumstances.

Looking your tax liability in the face and communicating clearly is an infinitely preferable situation to burying your head in the sand, not to mention ensuring you the added cost of a late payment penalty.

A typical time to pay arrangement will last twelve months, and all other taxes must be paid when they are due, or any HMRC time to pay arrangement will be in default.

If there is a default, you are likely to lose the confidence of HMRC, which considerably reduces the company’s options to settle with HMRC.

Negotiating a Time to Pay with HMRC

When initiating negotiations with HMRC for a Time to Pay arrangement, it’s essential to prepare thoroughly. Ensure your financial statements are up-to-date and you clearly understand your cash flow projections. This preparation will enable you to propose a realistic repayment plan that aligns with your company’s financial capacity.

Start the conversation by clearly outlining your company’s financial situation and how it led to the outstanding liabilities. Be transparent and provide evidence to support your statements. This approach can build trust and show HMRC you are committed to resolving the debt.

Be prepared to discuss your proposed repayment schedule in detail. This includes how much you can afford to pay monthly, how long you will need to clear the debt, and any steps to ensure your company’s financial stability.

HMRC is often willing to consider TTP arrangements if they believe it will result in the total debt being paid. Demonstrating your commitment to meeting these payments by providing a detailed plan can increase the likelihood of acceptance.

Finally, if you’re unsure how to approach the negotiation or prepare the necessary documentation, consider seeking advice from a licensed insolvency practitioner. We can offer valuable insight into the process, help prepare your proposal, and even negotiate on your behalf. Engaging professional help can provide reassurance and support, ensuring you navigate this process as effectively as possible.

Applying for a Time to Pay Arrangement

When applying for a Time to Pay (TTP) arrangement with HMRC, preparing a detailed cash-flow forecast is paramount. This forecast demonstrates your company’s ability to afford the proposed tax repayments as part of your financial commitments. It should accurately reflect your company’s incoming and outgoing cash flows, highlighting how the TTP repayments will be integrated.

In assessing your application, HMRC will consider several key factors:

• Compliance History: Your track record with HMRC plays a crucial role. They will review your history of compliance with their rules and regulations, focusing on the reliability of past tax returns and your adherence to previous terms of agreement. A solid history of compliance can significantly bolster your case.
• Business Sector: The industry or niche your business operates within will also be evaluated. Specific sectors may have historical patterns of unreliability in meeting tax obligations, which could influence HMRC’s assessment of risk associated with granting a TTP arrangement.
• Previous Payment Arrangements: If you have previously entered into a TTP arrangement with HMRC, this will be taken into account. While having a past arrangement does not disqualify you, it may affect HMRC’s willingness to offer another, especially if there are any issues with compliance.

Time to Pay Timeframes and Cancellation Risks

Time to Pay (TTP) arrangements with HMRC typically have timeframes ranging from 3 to 6 months, depending on your company’s capacity to settle its tax liabilities. However, in certain situations, a term of up to 12 months may be negotiated if it aligns with your financial situation and you can convincingly demonstrate your company’s ability to fulfil the longer repayment term.

The risk of cancellation looms if payments are missed. HMRC closely monitors adherence to the TTP agreement, and any deviation from the agreed payment schedule can lead to immediate cancellation. Such a step demands immediate repayment of the entire outstanding tax debt and may also prompt HMRC to take more stringent collection measures.

Pros and Cons of a Time to Pay Arrangement

Is There Interest on Time to Pay Arrangements?

HMRC charges interest on late and early payments per their current guidance document.

Can HMRC Refuse a Payment Plan?

HMRC can certainly refuse a payment plan.

There are no set criteria, but you must have a convincing argument for why you can’t pay your tax bill on time and how you will pay them back during the agreement. They will want to see evidence of your ongoing expenses and projected income. Ultimately, they want to hear commitment and determination on your part to pay them back in full.

HMRC will undoubtedly insist on a direct debit for your monthly instalments.

If you have had a TTP arrangement in the past, this does not preclude you but makes you less likely to be accepted.

Can I Arrange TTP Arrangements for Longer than 12 Months?

The HMRC website states they will not accept payment outside of twelve months unless there are exceptional circumstances (such as COVID-19). They also refuse to negotiate the amount owed to a reduced settlement figure.

You should also remember that HMRC will insist that all other ongoing taxes are paid promptly when due. After all, there is little point in HMRC agreeing to a time to pay arrangement for VAT if you fail to pay corporation tax.

Will HMRC agree Time to Pay Arrangements for VAT, Corporation Tax or PAYE?

HMRC can offer you up to a year to pay back your VAT, Corporation Tax or PAYE arrears in instalments, though no longer than this except in exceptional circumstances. Be aware HMRC may want the arrears repaid in a shorter period.

What if you Fail to Keep to the Arrangement?

HMRC’s flexibility will likely come to an abrupt end if you fail to keep to a payment plan you’ve already negotiated. In addition, the payment plan will fail if other due taxes are not paid. If you don’t make your agreed payments, they will probably cancel the Time to Pay Arrangement and possibly impose a penalty.

You want to avoid this situation at all costs because it may provoke legal action.

The legal action could cause a Distraint Order Notice, where HMRC announces their intention to enter your property and seize your company’s possessions or serve a winding up petition on the company. If upheld by the judge, this imposes a compulsory liquidation of the company and can have severe consequences for directors.