HMRC Time To Pay (TTP) Arrangements

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

An HMRC Time to Pay (TTP) Arrangement is an agreement made between a business and HM Revenue & Customs to allow the company to pay its outstanding tax liabilities over an extended period of time.

These agreements are designed to provide more breathing space for a company experiencing financial difficulty and improve cash flow problems.

A typical TTP will last twelve months, during which other taxes must be paid when they are due.

Understanding HMRC’s Approach to Time to Pay (TTP)

Falling behind with payments to HMRC, whether PAYE, VAT or Corporation tax, is never a good idea. When HMRC starts 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 is generally open to a payment plan and is keen for as many small and medium-sized businesses to survive as possible. The key to negotiating a TTP with HMRC is good communication, providing detailed information, being consistent and transparent, and having experienced negotiators who know how HMRC operates.

Negotiating a Time to Pay with HMRC

When initiating negotiations with HMRC for a TTP, our advice is to prepare thoroughly.

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.

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.

Finally, if you’re unsure how to approach the negotiation or prepare the necessary documentation, consider seeking advice from a licensed insolvency practitioner such as ourselves. We can offer valuable insight into the process, help prepare your proposal, and even negotiate on your behalf.

Applying for a Time to Pay Arrangement

When applying for a Time to Pay (TTP) arrangement with HMRC, we advise preparing a realistic proposal backed by a detailed cash-flow forecast.

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.

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 it does make 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 TTP for VAT if you fail to pay corporation tax.

Will HMRC agree TTP 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 TTP 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 result in a Distraint Order Notice, in which HMRC announces its 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.