What is a HMRC Time to Pay Arrangement for VAT, Corporation Tax and PAYE?

Understanding HMRC Time to Pay Arrangements

HMRC Time to Pay Arrangements give a limited company additional time to pay the tax they owe if they have fallen behind in their payments. Time to Pay Arrangements can be used to deal with overdue PAYE, VAT, and Corporation Tax. 

Not all companies will be permitted to enter into a Time to Pay plan; however, those companies which have a previously good compliance record with HMRC and those which can propose a sensible repayment plan to HMRC stand a better chance of success.

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

It may be possible for you to negotiate additional time to pay HMRC the tax you owe through a Time to Pay Arrangement repayment plan. Not only will a Time to Pay plan give you longer to pay what you owe, it will also stop further penalties being added to your tax arrears too.

When a company is experiencing cash flow problems, paying taxes such as VAT, PAYE and Corporation Tax, is often one of the first things directors fall behind on. Paying limited company tax obligations late can send up a red flag to HMRC that your company is on the road to becoming, or perhaps already is insolvent, and this is where your problems can really start.

HMRC's systems are quick to spot late payers and falling behind in your VAT, Corporation Tax and other HMRC tax obligations, will result in penalties and surcharges being added to the outstanding balance, as well as the possibility of more serious action such as a winding up petition being taken against your limited company.

 

 

 

How does a HMRC Time to Pay (TTP) Arrangement work?

A Time To Pay Arrangement allows for your debt to HMRC tax to be paid back in monthly instalments, typically over a period of up to 12 months. Although depending on your business circumstances and affordability, some arrangements can be agreed over longer periods if you need more time to pay. 

If you are having trouble paying your tax bill, or you foresee yourself struggling to be able to meet your tax obligations in the future, you should contact HMRC at the earliest opportunity, or contact us for specialist advice.

Will HMRC give me a Time to Pay for my tax bill?

You are much more likely to have a Time to Pay arrangement request agreed to if you have conducted your tax affairs well in the past. However, we can still look to help even if you have a poor compliance history with HMRC, it may just take more negotiating in order to come to a mutually agreeable solution.

If you need more time to pay your tax bill, a Time To Pay instalment plan may be a viable solution for your company and Real Business Rescue can offer support to business owners and directors who are considering this option.

Before rushing into this as a way to bring your tax arrears up to date, it helps to have a little knowledge on what the process entails and how likely you are to have this accepted by HMRC.

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Negotiating more time to pay company tax debts with HMRC

If you need more time to pay your Corporation Tax, PAYE, or VAT bill, this possibility needs to be negotiated with HMRC.

When asking for additional time to pay your tax debt, it is important to be honest about the amount your company can comfortably afford and not to overstate this figure.

HMRC will not agree to any Time to Pay arrangement unless they are confident that you will be able to keep up with the payments; offering to pay more than you can realistically afford will sound alarm bells and could well see your Time to Pay proposal being refused or rejected.

How to ask HMRC for a Time to Pay plan

During the Time to Pay application, HMRC will assess:

The interviewer will use this opportunity to advise you of your rights and what the penalties may be if you don’t keep to the arrangement or falsify information in any way.

While you can conduct the negotiations with HMRC directly, you may prefer to enlist the help of a professional to put forward your case on your behalf.

At Real Business Rescue, our licensed insolvency practitioners have vast experience of dealing with HMRC and negotiating Time To Pay arrangements for our clients. If you would prefer not to handle this process yourself we can contact HMRC and liaise with them on your behalf using our expert knowledge to give your company the best chance of getting this arrangement in place.

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How much additional time will I be given in a HMRC Time to Pay Arrangement?

A Time to Pay arrangement is set for a defined period, but each case is judged on its own merits so the amount of additional time given by HMRC does vary from company to company. Time to Pay arrangements lasting more than a year are rare, but achievable dependent on the circumstances. If your company needs a longer instalment plan, other restructuring options may be more suited to your needs.

Real Business Rescue’s licensed Insolvency Practitioners can assess your company’s financial situation and discuss the other routes you could take should your tax debts be causing cash flow problems.

Principles and guidelines of a HMRC Time to Pay Arrangement

Entering into a Time To Pay arrangement does not reduce the total amount of tax your company owes HMRC, it simply allows for the balance to be cleared in a series of more affordable instalments. Here are a few of the key principles and guidelines of a HMRC Time To Pay Arrangement:

Keep in mind that the most important stipulation is that your company lacks the ability to pay its taxes on time. HMRC will not agree to a Time To Pay arrangement for any other reason.

Entering into a Time To Pay arrangement will ensure you do not face the late payment penalties HMRC impose on those that do not pay their tax bill on time, however, you will be charged interest on the amount of tax still outstanding.

Can HMRC cancel a Time to Pay Agreement?

Once agreed to, HMRC must keep to the terms of the Time to Pay Arrangement, so long as you make the payments agreed, except under exceptional circumstances.

If there are any changes in your company’s situation which means it is no longer supportive of the agreed Time to Pay plan, they have the right to withdraw. Honesty is imperative and if HMRC discover that you have falsified or misled them in any way during the application process, they can, and often will, terminate the agreement.

What happens if I fail to keep up with a HMRC Time to Pay Arrangement?

If you default on the agreed payments towards your Time to Pay arrangement then HMRC are then able to break the agreement and demand you bring your tax arrears up to date immediately. 

This is why it is so important that you do not over-promise when proposing a monthly repayment amount to HMRC. Your Time to Pay arrangement stands a much better chance of completing successfully if you agree to pay an amount your company can comfortably afford even if it means that plan has to run for an additional month or so. 

Remember, a HMRC Time to Pay Arrangement is for temporarily distressed companies that have the capability of future viability. If you believe your company's financial problems go beyond its tax arrears, you should contact a licensed insolvency practitioner to understand alternative insolvency options which may be more appropriate for your situation.

What if HMRC reject or refuse my company a Time to Pay?

There are several reasons why a HMRC Time to Pay proposal may be rejected by the tax body.

For many instances it comes down to the simple fact that HMRC have reason to doubt the company's ability to clear the entire balance in a timely manner; for others that have a track record of not paying HMRC or keeping them waiting for payment without communication, HMRC may be unwilling to consider such an arrangement as a matter of principle.

If you have been refused a Time to Pay, you may need to consider a formal insolvency solution such as administration or liquidation to solve your company's financial problems.

How Real Business Rescue can help with HMRC Time to Pay Arrangements

If you are in VAT, PAYE or Corporation Tax arrears, Real Business Rescue can advise you on whether or not Time to Pay is an option worth pursuing with HMRC.

This may be a viable solution to your tax arrears, but there may be other more suitable alternatives to explore. Contact us for a free initial consultation to talk through your options with a licensed insolvency practitioner.