Falling behind with payments to HMRC, whether PAYE, VAT or Corporation Tax is never a good idea. When HMRC start chasing you and putting pressure on 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 which means tax ultimately gets paid and are 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 good information, being consistent and transparent and also often having experienced negotiators help you who know how HMRC operate.
We are highly experienced in helping small businesses with Time to Pay Arrangements and because we specialise in working with small businesses, our process is streamlined and our charges affordable. Please do get in contact to find out how we can help you.
What is a HMRC Time To Pay Arrangement?
HMRC Time to Pay Arrangements are structured payment plans for tax debt repayment over an agreed time period.
They are agreements reached between a business and HM and Revenue in order to provide more breathing space for a company in financial difficulty.
HMRC does not agree to payment plans easily but equally they do recognise that in certain circumstances businesses need help.
How Do Time to Pay Arrangements with HMRC Work?
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.
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 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.
HMRC 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 Instalments 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.
Payment Plan Criteria
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 unreliability 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.
Is There Interest on Time to Pay Arrangements?
As of 2021, it is 2.6% per annum
Can I Arrange TTP Arrangements for Longer than 12 Months?
The HMRC website states that 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.
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 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.
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.
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.
HMRC Business Payment Support Service (PSS) on 0300 200 3835.
HMRC Time to Pay Phone Number is 0300 200 3822
If you feel you need a professional third party to negotiate a settlement then call 0800 074 6757 and speak to our specialist HMRC department.