What are the consequences of missing an HMRC Time to Pay Arrangement payment?

What is an HMRC Time to Pay Arrangement?

An HMRC Time to Pay (TTP) Arrangement is a payment plan HMRC offers to some company and individual taxpayers who are unable to pay their tax bills in full when they are due. 

If your company cannot pay a VAT, PAYE or Corporation Tax liability by the deadline, you should contact HMRC, preferably before the payment is due, to discuss your options. HMRC is not obligated to offer taxpayers more ‘time to pay’. However, if your company is financially viable and has a history of good tax compliance, you should be able to negotiate a deal. 

TTP Arrangements allow you to pay what you owe in monthly instalments over a typical period of three to six months, although they can last up to 12 months or more. During that time, you must pay what you can realistically afford towards the debt while keeping up with your ongoing tax payments at the same time. You will have to pay interest on the outstanding sum, but you should be able to avoid penalties as long as you keep up with the scheduled payments.

What happens if you miss an HMRC Time to Pay payment?

If you miss a monthly Time to Pay Arrangement payment and do not inform HMRC beforehand, it can lead to swift and escalating consequences that could have a significant impact on your business. 

If you miss or are late in making a payment, HMRC will usually contact you to find out why. Depending on the circumstances, it may be possible to rearrange or renegotiate the payment plan. However, arranging an affordable Time to Pay Arrangement the second time around can be difficult, particularly if HMRC has lost trust, believes you have a lack of financial control or feels the business is no longer financially viable. 

If you cannot negotiate a TTP Arrangement on amended terms, HMRC can cancel the agreement and make your business immediately liable for the full amount plus interest. If you cannot pay what you owe, HMRC has broad enforcement powers to recover the debt. That typically includes:

• Late payment penalties - HMRC applies penalties in addition to the interest, which will increase the size of the debt.
• Debt collection agencies - It can instruct third-party agencies to collect the debt on its behalf. 
• County Court Judgments - HMRC can issue a County Court Judgment against the company, which can damage its credit rating.
• Asset seizure - HMRC can also instruct bailiffs to visit your business premises to seize assets to sell to recover the debt. 
• Winding Up Petition - If HMRC cannot recover the outstanding sum and believes your company is insolvent, it can issue a Winding Up Petition to force its closure via Compulsory Liquidation.  

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What should you do if you cannot make an HMRC Time to Pay Arrangement payment?

If you know there’s a risk you will not be able to make a TTP Arrangement payment, you should contact HMRC immediately using the following Time to Pay helpline numbers:

• Corporation Tax - 0300 200 3835
• VAT or PAYE - 0300 200 3836

Being proactive and giving HMRC advanced warning will show you are being open and honest about your situation and doing what you can to make the payment. HMRC will typically be more flexible as a result. 

It’s important to note that a Time to Pay Arrangement is not set in stone. It is a flexible agreement that you can amend to reflect your changing circumstances. If you contact HMRC early, it may apply a short grace period to give you more time to make the payment. Alternatively, if your circumstances have changed, you may be able to make a revised arrangement over an extended period with lower monthly payments.

You will have to clearly explain the cause of the delay and why your circumstances have changed. If HMRC believes you can still clear the debt over an acceptable period, it will revise the terms of the arrangement. However, be aware that the longer your agreement is, the more you’ll pay in interest.

What are my options if I cannot agree or stick to a Time to Pay Arrangement?

If you miss a TTP payment and you cannot make a revised arrangement with HMRC, you do still have options.

Raise additional finance

There may be steps you can take to boost cash flow and raise the capital you need to pay what you owe in full. Invoice finance and asset-based lending are two alternative forms of finance that could give you access to the funds you need when traditional forms of lending are unavailable. 

Enter into a Company Voluntary Arrangement (CVA)

A Time to Pay Arrangement is not the only payment plan you can enter into when your company is struggling. A Company Voluntary Arrangement is a formal insolvency procedure that consolidates all your debts, including unpaid tax bills, into a single monthly payment to your creditors. In this case, all interest and penalties are frozen, and some of the debt may be written off. 

You need 75% of your creditors (by value) to agree to your CVA proposal. That can be problematic if HMRC is your only creditor or you have been refused an amended Time to Pay Arrangement. 

Company closure

If you cannot make or stick to a Time to Pay Arrangement and your company has no realistic prospect of making a recovery, your best option is likely to be a Creditors’ Voluntary Liquidation (CVL). 

A CVL is a legal and efficient way to close a company that cannot pay its debts. As part of the process, a liquidator will sell the company’s assets and use the proceeds to repay the creditors as far as possible. As long as you have met your duties as a company director, any debts the company cannot repay, including tax liabilities, will be written off. You may also be eligible for director redundancy pay. 

How can we help?

If you’re struggling to make or stick to a Time to Pay Arrangement, we can negotiate with HMRC on your behalf. Our Insolvency Practitioners have vast experience and strong relationships with HMRC, which increases the likelihood of negotiating a deal. We can also advise you of alternative solutions and provide practical support from start to finish. Please get in touch for a free consultation or arrange a meeting at one of our 100+ offices throughout the UK.