Updated: 29th January 2020
I am falling behind on paying corporation taxes, PAYE or VAT? Will HMRC give me more time to pay what I owe?
When a company is experiencing cash flow problems, paying taxes such as VAT and PAYE, is often one of the first things which director’s fall behind on. Her Majesty’s Revenue & Customs (HMRC) is the most common business creditor and the majority of insolvent companies will owe some form of debt to HMRC. Paying taxes late can send up a red flag to HMRC that your company is on the road to becoming, or already is insolvent, and this is where your worries can begin in earnest. It is not a good idea to keep the taxman waiting because the new electronic system in place is quick to spot late payers.
Depending on your circumstances, it may be possible for you to negotiate extra time to pay the amount owed through what is known as a Time to Pay arrangement with HMRC.
At anytime you can speak to one of our many clients to gain first hand experience of how we helped and supported them through the financial difficulties they encountered.
A TTP Arrangement allows for your debt to HMRC 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 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.
Whilst it is true that 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, i.e. by being up to date with what is due, we can still look to help even if you have a poor compliance history with HMRC.
If you need more time to pay your tax bill, a TTP 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. However, 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.
If you need more time to pay your tax bill, this possibility needs to be negotiated with HMRC. HMRC states on their website that they prefer to be contacted via their telephone helpline, but in most instances you will need to produce your repayment offer and case in writing, along with copies of a cash flow. You will need to put forward your case explaining why you are unable to pay the amount owed, and how much you are able to offer as a monthly payment. When asking for additional time to pay, 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 proposal being rejected.
During the call HMRC will also 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. We have vast experience of dealing with HMRC and negotiating TTP 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 help you get this arrangement in place.
First and foremost, when considering the possibility of a TTP arrangement, HMRC will look at the ongoing viability of the company in question. They understand that even well-run businesses experience cash flow problems from time to time, and are therefore willing to listen to those businesses in genuine financial difficulty who have done their best to keep up to date with their tax affairs. A Time to Pay (TTP) arrangement is set for a defined period, but each case is judged on its own merits so the length of time given does vary from company to company. A TTP arrangement lasting more than a year is rare but achievable, dependent on the circumstances. If your company needs a longer instalment plan, other recovery 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 a TTP arrangement not be suitable.
Entering into a TTP arrangement does not reduce the total amount of tax owed, it simply allows for the balance to be cleared in instalments. Here are a few of the key principles and guidelines of TTP:
Customers MUST make a reasonable proposal in terms of what they can afford over a specific time period
HMRC needs to be satisfied that you (the customer) will not have the ability to meet the tax due date
TTP is to provide extra time for those companies experiencing financial problems, not for those wishing to use the money elsewhere (i.e. for expansion or investments). Essentially, you need to be willing to pay, just unable to do so at the present time.
If the company’s financial circumstances change in any way, either for the better or the worse, you must notify HMRC immediately
The instalments are to be over the shortest time period reasonably possible
HMRC’s decision is ‘risk based’ so if there is a greater amount of risk, they may require further information before reaching a decision
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 TTP arrangement for any other reason.
Entering into a TTP 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.
According to law, once agreed to, HMRC must keep to the arrangements except under exceptional circumstances. If there are any changes in your company’s situation which means it is no longer supportive of the TTP 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. If you default on the payments they can break the agreement and of course, if your situation worsens they will reassess the amount of risk. Remember, Time to Pay is for temporarily distressed companies that have the capability of future viability. If you should be wound up by a creditor or are on the verge of becoming wound up, any outstanding TTP agreement may very well be cancelled.
If the problems of your company are related to an outstanding HMRC tax debt, TTP could make all the difference when it comes to the ongoing viability of the business. However, depending on the financial situation of the company on the whole, this will not be an adequate solution for every situation. If debts are large or there are creditors in addition to HMRC, an alternative recovery plan may be necessary.
If you are delinquent on VAT, PAYE or even on your corporation taxes, Real Business Rescue can advise you on whether or not Time to Pay is an option worth pursuing. 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 so that we can help you prepare for your interview with Time to Pay. Better yet, we can offer comprehensive support and advice on all matters concerning your company’s financial distress.