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Are you finding it hard to pay your company tax debt and so need some breathing space? If so, you may find that the Time to Pay scheme – [1]GOV.UK “Paying HMRC in installments – from HMRC provides a solution to clear tax arrears until your business can again meet its obligations for PAYE, VAT and Corporation Tax.

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HMRC Time to Pay Arrangement

Time to Pay is a formal arrangement agreed with HMRC where your overdue tax bill can be paid in installments – [2]GOV.UK “Difficulties paying HMRC. It includes all outstanding amounts overdue, including penalties and interest. Tax debts have risen sharply because of the pandemic and so rising numbers of directors are contacting HMRC about Time to Pay.

Is Time to Pay Right for my Company?

Time to Pay is suitable for companies that have amassed tax debts because of temporary cash flow problems. If you believe the business cannot survive because of financial hardship, then there is no point setting up a Time to Pay arrangement and you should instead look at closing the business via a Company Voluntary Liquidation. 

Alternatively, a Company’s Voluntary Arrangement is a legal procedure where an insolvent business is able to continue trading, with creditors having agreed to some of their debt being repaid over a period of between one and five years. If you are not sure if Time to Pay is right for your firm, then speak to a licensed insolvency practitioner as they will be able to provide you with the necessary guidance. 

How do I set up a Time to Pay Arrangement with HMRC?

You should contact HMRC directly and do this as soon as you realise that you do not have the funds to pay. If you leave tax bills unpaid, the amount will quickly mount up, as will HMRC’s enforcement action. You will need to provide details for identification purposes including your tax reference number and have details on what you owe.

The Time to Pay representative will want information about your company and it will also take into account the sector you are in – so, if your firm is in hospitality or travel, for example, these were particularly affected by the pandemic and may have higher tax debt. 

You will also need to have a range of information about your business to hand and be prepared to explain the numbers. This should cover current business performance, a cash flow forecast for the next six months and your future trading plans.

Before speaking to HMRC, you should also have a clear idea about what you will be able to pay in instalments. You should be cautious in terms of what you can afford, even if you expect business to pick up considerably. This will be an area where you may need to put forward a compelling argument in terms of agreeing an amount that is affordable and yet HMRC also finds the figure acceptable.

HMRC may also ask about your business assets to see if any of these could be used towards the debt before a Time to Pay Arrangement is agreed. 

What is the Timeframe for a Time to Pay Arrangement?

Broadly, Time to Pay Arrangements would last for between three and six months in terms of agreed instalments. However, it is now more common for HMRC to last for a longer period of up to 12 months to clear outstanding tax liabilities. This is because businesses are more likely to have larger tax debts because of Covid-19 and HMRC has also been instructed by the government to show more leniency and so help prevent unnecessary insolvencies if possible. It is rare for a Time to Pay arrangement to be agreed for longer than 12 months, but you should certainly request this if you think this is reasonable. 

What Will Happen if I Miss a Time to Pay Payment?

You should contact HMRC urgently if you miss the monthly payment and explain the situation and provide details of when you will be able to make the payment. It is likely that you will be hit with more interest, but failing to act could mean the agreement is cancelled and HMRC will take robust enforcement action, potentially leading to your company being wound up. 

Can Time to Pay be Changed Once set up?

Time to Pay offers some flexibility and you may be able to amend it. So, if you find your financial situation improves considerably and you are able to make a large payment to clear the debt, then get in touch with HMRC and this will be taken. If, on the other hand, your business continues to have financial difficulty – but remains viable – you may be able to extend the arrangement. 

How can I Ensure HMRC Agrees to a Time to Pay Arrangement?

Each case is decided on an individual basis – there are no guarantees and HMRC has the right to turn down a request. However, if you are well prepared, have all the necessary information to hand and have a clear idea of what you can pay and over what timeframe. You may be asked if you can make an immediate payment towards the outstanding tax on the phone – this may be an indication of good faith and so you may want to consider doing this, even if it is only a small amount.

Overall, if HMRC believes your business does not have a future, then they will not agree to Time to Pay. 

Generally, HMRC is also more likely to agree to Time to Pay if the company has paid its taxes on time. However, given the current circumstances there are many more businesses in arrears and so your situation may be taken into account.

HMRC expects all companies to have their tax arrears cleared as a priority. If you are planning to pay other debts or perhaps need more funds to pay for another business expense or ease cash flow problems, then this is not a reason to use Time to Pay. 

Do you Need Help With Getting a Time to Pay Arrangement?  

A licensed insolvency practitioner may help you prepare for the important conversation with HMRC. This will include assessing the proposal you will put forward and decide on the most suitable instalment plan – they may also be able to negotiate on your behalf.         

How to Contact HMRC

HMRC has a dedicated helpline – [3]GOV.UK “Covid tax helpline – to help companies that have been affected by the covid pandemic. Guidance is available, including on Time to Pay. The helpline can be reached on 0800 024 1222 and the helpline is open on Monday to Friday from 8am to 4pm. If you want to talk about Time to Pay and this is not connected to the pandemic, then you should contact HMRC’s Payment Support Service – [4]GOV.UK “Payment Support Service – on 0300 200 3835 – the opening hours are Monday to Friday from 8am to 6pm.

References

All Company Debt insolvency content is written by our licensed insolvency practitioners.

The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.

You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy here.

  1. GOV.UK “Paying HMRC in installments
  2. GOV.UK “Difficulties paying HMRC
  3. GOV.UK “Covid tax helpline
  4. GOV.UK “Payment Support Service
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