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What is a HMRC Time to Pay Arrangement for VAT, Corporation Tax and PAYE?
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What is a HMRC Time to Pay (TTP) arrangement?
A Time to Pay (TTP) arrangement with HMRC is a payment plan which gives a company more time to bring their tax arrears up to date. Time To Pay plans typically last around six months, although up to 12 months can be given in certain instances. During this time, the company must repay all of their HMRC tax debts - including VAT, PAYE, and Corporation Tax - as well as ensuring payment is made for any tax which becomes due during the Time to Pay arrangement.
It may be possible for you to negotiate additional time to pay HMRC the tax you owe through what is known as a Time to Pay payment plan. Not only will a Time to Pay plan give you longer to pay what you owe, it will also usually stop further surcharges being added to your tax account balance.
When a company is experiencing cash flow problems, paying taxes such as VAT, PAYE and corporation tax, is often one of the first things which director’s 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 already is insolvent, and this is where your worries can begin in earnest.
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.
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.
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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. 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. 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 Corporation Tax, PAYE, or VAT 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 your limited company's cash flow position. You will need to put forward your case explaining why you are unable to pay the tax owed, and how much you are able to offer as a monthly payment.
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.
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During the call HMRC will also assess:
- The long-term viability of your company
- The probability of a Time to Pay plan being successful
- Appropriate alternatives if you don’t keep to the planned repayments as agreed
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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First and foremost, when considering the possibility of a Time to Pay 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 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. 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.
Entering into a Time To Pay arrangement does not reduce the total amount of tax owed, 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:
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 without a Time to Pay arrangement in place
Time to Pay 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 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.
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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 agreed time to pay arrangement, 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 the Time to Pay?
If you default on the agreed payments then HMRC are then able to break the agreement themselves, and 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 Time to Pay agreement may very well be cancelled.
What if HMRC reject or refuse my company a Time to Pay?
There are several reasons why a Time to Pay proposal may be rejected by HMRC. For many companies 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, HMRC may be unwilling to consider such an arrangement as a matter of principle.
If you have been refused a Time to Pay, or you believe your application is likely to be rejected, you may need to consider a formal insolvency solution such as administration or liquidation to solve your company's financial problems.
If you are delinquent on VAT, PAYE or corporation tax, 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 debt situation.
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