What is a Time to Pay (TTP) breach?

Updated: 27th March 2021

Consequences of failing HMRC Time to Pay Arrangement for tax arrears

Time to Pay arrangements (TTPs) enable businesses to pay off arrears of tax and National Insurance over an extended period of time, limiting HMRC penalties and allowing for recovery of commercial momentum.

TTP instalment plans are typically offered to businesses experiencing temporary financial difficulty rather than those with long-term issues, and a key part of the process is establishing a repayment amount that’s affordable to the business for the whole term.

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Breaching a Time to Pay arrangement

Given our erratic economy and uncertain business environment, it’s not unusual for businesses that have entered into a HMRC Time to Pay arrangement to default, and breach the agreed terms.

This can result in serious difficulties for the business, particularly as HMRC are known to take enforcement action quickly to recover their money. If you know you are likely to fall behind in your TTP arrangement, you must inform HMRC as soon as possible, preferably before the breach takes place, so they can review the situation.

So what might happen when a TTP is breached, and is it possible to limit the damage to your company?

What happens when a Time to Pay arrangement is breached?

  • After reviewing their position following the breach of a TTP, or when a repayment is about to be missed, HMRC may offer an extension if they believe the arrangement remains generally viable. They’ll undertake extensive and stringent enquiries into your situation, however, and you’ll need to present further detailed evidence of the company’s ability to adhere to any future arrangement.
  • HMRC may cancel the Time to Pay arrangement, and demand the outstanding amount in full. Enforcement action will follow if you’re unable to pay, and could include the seizure of business assets under a controlled goods agreement.
  • Being unable to pay your TTP may result in a winding up petition being made against your company. Most creditors must officially establish the existence of a debt prior to petitioning for a company’s winding up such as by issuing a County Court Judgment (CCJ) against the company, for example, or via non-payment of a statutory demand – but HMRC have the power to close down a company without having to go to court.
  • A further issue arises if HMRC issue Personal Liability Notices (PLNs) to directors and/or employees in senior positions when petitioning for the company’s winding up. These notices make the recipient(s) liable for the company’s tax debt, and can lead to personal bankruptcy alongside the company’s liquidation.

What can you do if you breach your TTP?

If you breach your Time to Pay arrangement, you have a limited time in which to act. If you cannot afford to repay the debt, your company may be able to secure alternative finance that would improve liquidity.

Alternatively, entering into a Company Voluntary Arrangement (CVA) may be an option if the company is deemed viable in the long-term. Company administration could also allow for the restructure of debt, or the sale of underlying business assets.

Begbies Traynor provides independent professional advice, and can guide you on your best options when a Time to Pay arrangement has been breached. We offer free same-day consultations to quickly assess your situation through our extensive network of offices around the UK.

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