HMRC Time to Pay Arrangement is an arrangement between a business and HMRC to repay taxes over an extended period of time. The arrangement is made to help businesses with their cash flow and to afford them time to pay their tax liabilities.
The terms of the arrangement are agreed upon by both parties and are based on the business’s ability to repay the tax liability.
The Time to Pay Arrangement is a voluntary arrangement and businesses are not required to make use of it. However, businesses that do make use of the arrangement may find it helpful in managing their taxes
How to successfully negotiate a Time to Pay arrangement with HMRC
If you find yourself in a position where you cannot pay your taxes on time, don’t despair. HMRC offers a Time to Pay (TTP) arrangement that can give you some breathing room. Here’s what you need to know about negotiating a TTP arrangement.
First, it’s important to contact HMRC as soon as you realize that you cannot pay your taxes on time. The sooner you get in touch, the better. Second, be prepared to provide detailed information about your financial situation. This will help HMRC tailor an arrangement that is affordable for you. Third, be realistic about what you can afford to pay. If you negotiate with HMRC an arrangement that you cannot keep up with, you will only end up in more trouble down the road. Finally, remember that HMRC is not required to agree to a TTP arrangement. If they feel that it is not in the best interests of the revenue, they may reject your request.
If you follow these steps, you give yourself the best chance of successfully negotiating a Time to Pay arrangement with HMRC.
What Is a Time to Pay (TTP) Arrangement?
A time to pay arrangement is an agreement between a taxpayer and HMRC that allows the taxpayer to spread their tax liability over an agreed period. This can be used where the taxpayer is facing financial difficulties and is unable to pay their tax bill in full and on time. It is important to note that a time to pay arrangement will not necessarily mean that the taxpayer will not have to pay interest on the outstanding amount, but it may help to reduce the amount of interest charged.
In order to qualify for a time to pay arrangement, the taxpayer must be able to demonstrate that they are unable to pay their tax bill in full and on time, and that they are able to make regular payments towards the outstanding amount. If you think you may be eligible for a time to pay arrangement, you should contact HMRC as soon as possible.
How Do Time to Pay Arrangements with HMRC Work?
Many people are unaware that HMRC offers a Time to Pay (TTP) service which can help if you’re struggling to pay your taxes. If you contact them and explain your financial difficulties, they may agree to spread your payments over a longer period of time. This can be a huge help if you’re facing a temporary cash flow problem or dealing with unexpected expenses.
It’s important to note that TTP arrangements are not available for everybody, and HMRC will only agree to them if they think you’ll be able to pay the full amount eventually. They also charge interest on the outstanding balance, so it’s not a long-term solution. However, it can provide some much-needed breathing room if you’re struggling to pay your taxes
.A typical time to pay arrangement will last twelve months and all other taxes must be paid when they are due or any HMRC time to pay arrangement will be in default.
The rate of interest on underpaid tax has seen a number of changes in recent months. HMRC late payment interest rate will increase by 0.5% to 4.75%, from 11 October 2022.
Negotiating Time to Pay with HMRC
If you’re having trouble paying your taxes on time, you can always try negotiating with HMRC. The first step is to contact them and explain your situation. Be honest about why you’re behind on payments and how much you can afford to pay each month. Once you’ve agreed on a payment plan, make sure to stick to it.
If you default on the agreement, HMRC may take more aggressive action, such as garnishing your wages or seizing assets. However, as long as you remain honest and compliant, they’re usually willing to work with you to help you get back on track.
Time to Pay arrangement are not a given an HMRC wants to be assured that 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 carry out an assessment if:
- 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 plan
It’s important to be honest with the interviewer and answer all questions truthfully. 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.
HMRC has vast experience in dealing with TTP arrangements and can provide expert knowledge to help get this arrangement in place. If you would prefer not to handle this process yourself, we can contact HMRC and liaise with them on your behalf.
How Much ‘Time to Pay’ Will I Be Given?
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.
TTP is not an easy route out of debt for a company – it should only be considered by those who have explored all other avenues and found them wanting. HMRC will work with the company to agree on a payment plan, but it is important to remember that this is a long-term solution – it may take years to pay off the debt in full. Nevertheless, for those companies who are struggling to stay afloat, TTP can provide much-needed breathing space.
The agreement between you and HMRC that allows you to pay your tax liabilities over an extended period of time, this option is typically used for businesses that are facing financial difficulties and are unable to pay their tax bill in full. While TTP arrangements can last for up to 12 months, each case is judged on its own merits so the length of time given does vary from company to company.
If your company needs a longer instalment plan, other recovery options may be more suited to your needs. 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.
Principles and Guidelines of Time to Pay
By entering into a TTP arrangement it does not reduce the total amount of tax that is owed, it simply allows for the balance to be cleared by 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
The most important aspect with a TTP is that your company lacks the ability to pay its taxes on time. HMRC will not agree to an agreement to make payments via installments for any other reason.
The TTP arrangement will ensure you do not face the late payment penalties imposed by HMRC for failure to pay a businesses tax bill on time. Interest is still charged on the amount of tax still outstanding.
Can HMRC Break the Agreement?
The law states that once an arrangement has been agreed to, HMRC must keep to the plan unless there are exceptional circumstances. This means that if your company’s situation changes and the TTP plan is no longer supported, HMRC can withdraw from the agreement.
However, it is important to note that this is only possible if the change in circumstances is significant enough to warrant a withdrawal. If your company is simply unable to meet the terms of the TTP plan, HMRC may be willing to renegotiate the agreement. Ultimately, it is up to HMRC to decide whether or not a change in circumstances warrants a withdrawal from the TTP plan.
Honesty is always the best policy, especially when it comes to your taxes. If you’re ever tempted to fudge the numbers or mislead the taxman, remember that HMRC has strict penalties for those who are caught out. Not only can they terminate your Time to Pay agreement, but they can also wind up your company if you default on the payments. So always be truthful when dealing with HMRC – it’s the only way to ensure that your business stays solvent.
However, TTP is not a suitable solution for all businesses. If your company is in a precarious financial situation, TTP may not be enough to keep the business afloat. In cases like these, it may be necessary to consider an alternative recovery plan. This could involve selling off assets, taking out loans, or even filing for bankruptcy. No matter what the situation is, it’s important to remember that there are options available. With the help of a professional advisor, you can explore all of the different debt solutions and find the one that’s right for your business.
Being behind on your taxes can feel like a daunting prospect, but it is important to remember that you are not alone. If you are struggling to keep up with VAT, PAYE or corporation tax payments, we can offer expert advice on the best course of action for your business. Time to Pay is one potential solution, but there may be other options that are more suitable for your company’s unique circumstances.
Our team of insolvency practitioners and financial experts can provide comprehensive support and guidance, helping you to navigate the challenges of financial distress. We offer a free initial consultation, so don’t hesitate to get in touch today.
Read more: How does HMRC debt affect your credit score
Advantages and disadvantages of Time to Pay
Like with any agreement it comes with advantages and disadvantages, here are the ones for a HMRC time to pay arrangement:
- Payments can be made over a longer period of time supporting cash flow
- TTP offers a breathing space for viable companies that are experiencing financial issues
- Formal insolvency procedures are averted
- Legal action is prevented and suspended
- Surcharges and penalties are avoided if the TTP is in place before a tax payment is due.
- All HMRC debts can be included in the agreement including Corporation tax, VAT and PAYE
- Allows for financial projections & Cash flow management to be simplified.
- All repayments need to met in full and on time
- Some high-risk industry sectors may be affected in its ability to obtain a TTP agreement
- Interest does not stop and is still payable on outstanding monies
- If either party cancels the arrangement enforcement action may ensue.
How to Contact HMRC about a Time to Pay Arrangement?
If you intend to speak with HMRC to negotiate a TTP it is wise to have all your information at hand, including your reference number, bank details, and a clear explanation of what you’ve done to try and pay the bill so far.
HMRC Business Payment Support Service (PSS) on 0300 200 3835.
HMRC Time to Pay Phone Number is 0300 200 3822
If you are not confident negotiate a settlement with HMRC and would like advice and assistance from a third party then call 01246 912052 and speak to our specialist HMRC department.
HMRC guidance: If you cannot pay your tax bill on time
HMRC guidance: How to pay a debt to HMRC with a Time to Pay Arrangement
Time to Pay arrangement with HMRC is a beneficial option for business owners who are facing difficulty in paying their tax debts on time. This arrangement allows a business to spread out their tax payments over a longer period of time, usually up to 12 months, helping to ease the financial burden and allowing them to focus on running and growing their business. Additionally, the arrangement can help to avoid legal action and additional penalties that may be incurred if taxes are not paid on time.
Furthermore, working with HMRC to set up a Time to Pay arrangement shows good faith and a willingness to repay the debt, which can help to maintain a positive relationship with the tax authorities. Overall, a Time to Pay arrangement can provide much-needed relief for business owners who are struggling with tax payments and help them get back on track.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.