Updated: 16th February 2021
A Time To Pay arrangement is a method of spreading your business tax payments over a longer period of time in a more affordable way. An agreement is reached between the business and HMRC in an attempt to provide some breathing space to the business and allow cash flow to improve.
Time To Pay has long been a common solution for UK businesses struggling to meet tax liabilities, but it's been propelled further into the limelight in following the outbreak of the COVID-19 coronavirus pandemic which is causing unprecedented levels of business disruption and unexpected cash flow problems for thousands of UK companies, partnerships, and sole trader businesses.
If your business is experiencing trading difficulties due to the impact of COVID-19, a Time To Pay arrangement could provide the respite you need in these challenging times. Our expert business recovery team at Begbies Traynor can provide immediate advice over the phone or face-to-face at your convenience - and always in the strictest confidence.
We've set up a dedicated helpline for company directors who are struggling with HMRC tax payments; you can discover the options available to you and your business and find out more about Time To Pay by calling us on 0333 009 6851.
In the 2020 spring Budget, the Chancellor of the Exchequer, Rishi Sunak, said Britain will rise to the challenge of COVID-19, adding that: "HMRC will scale up the Time To Pay service to allow businesses and self-employed to defer tax payments."
Known as a Time to Pay (TTP) arrangement, it is designed to help businesses that are fundamentally viable but experiencing temporary cash flow problems.
If HMRC believes that your company is at risk of becoming insolvent, they may act quickly to recover their money, so we must stress that a Time to Pay arrangement is only for those businesses which are fundamentally viable.
Our advice is to always be proactive with HMRC – don’t wait to be contacted by them because your tax payment was late. The existence of Time to Pay arrangements indicates an understanding by HMRC that problems will arise, and a willingness to help under certain circumstances, but the responsibility remains with you to initiate contact.
A TTP arrangement is a method of spreading your tax payments over a longer period of time than would otherwise be available. It is used for arrears of corporation tax, VAT and PAYE, but can also be used if you are anticipating problems with an upcoming payment or payments, and it may help you to avoid a late payment penalty.
HMRC will want to satisfy themselves that you are not trying to deliberately avoid meeting your tax liabilities. When weighing up the risk of allowing extra time to pay, they also consider the industry in which you operate, and its previous history of repayment as a whole.
If a TTP arrangement is agreed, it is imperative that you meet these payments in full and on time, otherwise your problems could significantly increase. HMRC could immediately cancel the arrangement if you default, calling in the total debt and applying a range of penalties.
If a TTP is agreed, interest will probably be charged on the amount to be paid, but penalties may be lifted if you have made contact with HMRC quickly, and acted responsibly to redress your situation.
Once you have put together a strong case in favour of being granted extra time to pay, you need to phone HMRC, or seek the help of a licensed insolvency practitioner who will negotiate on your behalf.
But what constitutes a ‘strong’ case? This means presenting a realistic proposal in terms of what you can afford to pay, backed up by evidence in the form of:
It is worth remembering that HMRC will want the TTP arrangement to be over the shortest time, with the highest repayments possible, in order to recoup their money quickly. You must be careful, however, to offer only what you can afford, and be certain that your company can meet its obligations as set out in the plan before it is agreed.
Dealing with HMRC can be problematic unless you understand how they operate, which is why many of our clients ask us to negotiate on their behalf.
Instalment terms are generally in the region of 3 to 6 months, but a term of up to 12 months may be possible. The amount of time offered depends on your current circumstances, previous history of payment, and the risk you pose as perceived by HMRC.
If your company has always filed its paperwork on time, paid taxes in full, and is not trying to avoid paying HMRC, this will all be beneficial for your case.
If your circumstances change during the course of the arrangement, however, you must inform HMRC immediately. There is a possibility that they will withdraw from the agreement if your new circumstances do not meet the TTP criteria.
Other reasons why the instalment plan might be cancelled include:
The fact that late payers are spotted quickly by HMRC makes it all the more important to contact them as soon as you know there is a problem. Not only will this strengthen your case in favour of a Time to Pay arrangement, it will help the company’s financial position as late payment penalties will be avoided.
Begbies Traynor offers a free initial consultation if you want to find out more about Time to Pay arrangements. We can enter into negotiations with HMRC on your behalf, or offer professional advice on how to present your case.