HMRC Time to Pay Arrangements are structured payment plans for tax debt repayment over an an agreed time period.
HMRC does not give these lightly but equally they do recognise that in certain circumstances businesses need help.
This article will explain how to obtain a payment plan for your tax return, as well as covering the criteria, likely timeframes, and what happens if you default.
Paying HMRC in Installments Due to COVID-19
In the light of the Coronavirus (COVID-19) situation HM & Revenue will certainly be more permissive than ever before as the government does everything it can to help businesses (and sole traders) through this challenging time.
HMRC have even set up a new helpline for business owners, with 2000 staff ready to offer advice and support.
Usually, these TTP agreements come with a 5% late payment charge for those that have missed a deadline but, according to Chancellor Rishi Sunak’s recent budget this will be waived for the duration of the virus.
If you concerned about not being able to pay your HMRC tax bill, this should be your first port of call.
HMRC Coronavirus Helpline
Telephone: 0800 015 9559
Monday to Friday, 8am to 8pm
Saturday, 8am to 4pm
Will HMRC give me Time to Pay?
Late payments are picked up these days by HMRC’s supercomputer, which 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 the them now, explaining 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 in turn considerably reduces the company’s options to settle with HMRC. With this in mind, it is critical that you seek professional insolvency help for time to pay arrangements.
Do you Qualify for a Time to Pay Arrangement?
A cash-flow forecast will be needed to prove that the company can afford the vat arrears as well as any taxes that may arise as part of any proposal.
In addition, HMRC will assess:
- How well you’ve complied with their rules and regulations. They are looking for reliability over any previous tax returns and your ability to meet their terms of agreement.
- What business niche you’re in. Certain sectors will have higher historical unreliablity and hence be considered greater risk for a TTP.
- Have you had a payment arrangement before for your tax bill? If the answer is yes it doesn’t automatically preclude you but it may be harder to arrange another one.
What’s the HMRC Time to Pay Interest Rate?
As of 2021, it is 2.6% per annum
How do I Set up a Payment Plan with HMRC?
There is no set criteria but you must have a convincing argument for why you can’t pay your tax bill on time, and how you are going to pay them back during the agreement. They will want to see evidence of your ongoing expenses, as well as projected income. Ultimately, they want to hear commitment and determination on your part to paying them back in full.
They will certainly 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.
Only Agree to Installments that are manageable
Do not be pressured into agreeing a monthly amount that you simply cannot fulfil in your time to pay HMRC agreement.
Make sure that they understand this – HMRC will have less confidence in you if you simply agree to whatever they suggest and default a month or so later.
This is where some time should be spent making sure you can afford to pay the ongoing repayments of tax owed.
Inform HMRC that you do not want to let them down by committing to something that you cannot maintain and that you are seeking professional help and advice.
Let them see that you are taking matters seriously as the tax arrears belong to the public purse as HMRC see it.
Can I Arrange an HMRC Time to Pay Arrangement for Periods of More than 12 Months?
The HMRC website states that they will not accept payment outside of twelve months unless there are exceptional circumstances. They also refuse to negotiate the amount owed to a reduced settlement figure.
There are plenty of stories about firms reducing the tax paid from the amount owed – however, whilst there are exceptions to every rule, these stories are mostly fictitious.
You should also keep in mind 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 .
What about HMRC 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.
Any Time to Pay arrangement must include assurances any taxes due within the payment term can be paid.
How do I negotiate with HMRC?
Speak with the tax inspector by telephone and, where possible, aim to book in a face to face meeting.
HMRC negotation is something we have a lot of experience of and, especially where larger sums are concerned, you will benefit from the presence of an experienced tax mediator such as ourselves, with a longstanding working knowledge of HM & Revenue.
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 tack on a penalty as well.
This is a situation you want to avoid at all costs because it may provoke legal action.
The legal action will cause what is called a Distraint Order Notice , where HMRC announce their intention to enter your property and seize your company possessions; or serve a Winding up Petition on the company. This Winding up Petition is a compulsory liquidation of the company and can have serious consequences for directors. If you find yourself in this situation you should consult an insolvency practitioner, such as ourselves, at your earliest convenience.
“I Am Contesting HMRC Debt, Will This Affect a TTP?”
You should commit to paying what you can of your time to pay HMRC arrangement whilst the matter is being resolved. HMRC will not waive the right to pursue taxes they know that are owed on the basis that they may have the whole amount wrong.
It is your responsibility to disprove HMRC’s claim for taxes owed and you will be expected to have clear documentation to support your case.
“What Should I do about a Threat from the HMRC Debt Enforcement Unit for a Failed TTP?”
To speak with a time to pay specialist, contact us today on 08000 746 757; or you can speak with Sue, our senior consultant on 07949 969 006. You can also use the Live Support feature on the bottom-right of this page.
If you’re having trouble paying your VAT bill, HMRC are open to late payment plans, providing certain criteria are met. They are less flexible around VAT than other areas (such as corporation tax arrears) simply because VAT is the government’s money in the first place, and companies merely tax collectors on their behalf.
That said, if you have a compelling reason for not being able to pay and can demonstrate that your business remains viable, there is a good possibility they will grant you the extra time. You’ll need to show them that there’s no way you can pay and that you haven’t diverted any money which could have gone to them into other areas, e.g. taken personally.
0300 200 3835
How to Contact HMRC about a Time to Pay Arrangement?
Before speaking with HMRC you’ll need to ensure you have all your information to hand, including your reference number, bank details, and a clear explanation of what you’ve done to try and pay the bill so far.
With that information in hand, you can reach the HMRC Payment Support Service (PSS) on 0300 200 3835.
The Self Assessment Payment Helpline is 0300 200 3822
If you feel you need a professional third party to negotiate a settlement then call 08000 746 757 and speak to our specialist HMRC department.