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HMRC Time to Pay Arrangements

What is an HMRC Time to Pay arrangement?

A Time to Pay (TTP) arrangement is an agreement with HMRC to spread your tax payments over a number of months rather than when they fall due. It can be an option for businesses experiencing temporary cash flow problems, but which are technically-speaking not yet insolvent.

HMRC may agree to a Time to Pay arrangement if your business has fallen behind with PAYE, NIC, VAT or corporation tax payments, or if you're expecting problems with meeting one or more upcoming tax commitments. With Time to Pay, you might be able to avoid late payment penalties, but will still be charged interest on overdue tax.

Time to Pay arrangements are open to all types of businesses including Sole Traders, Partnerships and Limited Companies.

Is Time to Pay suitable for my business?

A Time to Pay arrangement isn't suitable for everyone. It's essentially a short-term solution that provides breathing space to get your company's finances back on track and overcome a temporary cash-flow crisis. If HMRC suspect there are deeper financial issues, or you're just trying to avoid or put off your tax liabilities, they won't agree to a Time to Pay arrangement and will take immediate steps to recover any tax already owing.

HMRC are more likely to enter into a Time to Pay arrangement if:

  • You contact them as soon as you realise there's a problem, ideally before you miss any tax payments
  • You have a genuine reason for late or non-payment, e.g. a key client going bust, or an unforeseen tax liability
  • You've filed all your previous returns on time and paid in full promptly
  • Your company poses an acceptable level of risk (see below).

We'll help you decide whether or not a Time to Pay arrangement is an option for your business. If Time to Pay isn't suitable, we'll talk you through alternative solutions and how they work. These might include a Company Voluntary Arrangement (CVA), which lets you repay all of your debts over a longer time period. Alternatively, if your current business cannot be saved, you may need to look at a Creditors' Voluntary Liquidation (CVL).

How Time to Pay works

If HMRC agree to a Time to Pay arrangement, you'll be required to make monthly payments to repay the full amount of tax owing. Most arrangements last between 3 and 12 months; but in exceptional cases HMRC can agree to extend payment terms beyond one year.

You'll be expected to start making payments by Direct Debit immediately, so it's important that you don't expect a payment break. And whilst your arrangement will be tailored to your individual business and its needs, note that HMRC will never agree to reduce your tax liability under any circumstances.

Once a Time to Pay arrangement is in place, you must stick to its terms and make all your payments on time. If you don't, the arrangement will be cancelled and HMRC may take formal debt recovery action against your company. A key condition of any Time to Pay arrangement will be that all future liabilities are paid on time, as well as your payments into the Time to Pay arrangement.

Setting up a Time to Pay arrangement

If we've agreed with you that Time to Pay is a good option for your business, Bridgewood will negotiate with HMRC on your behalf. We deal with HMRC every day and fully understand how they operate, so you'll have the best possible chance of reaching a realistic agreement that suits both parties.

Your Bridgewood debt advisor will work with you to create a Time to Pay proposal. This will include:

  • An explanation of why you haven't met your tax commitments, or are unable to meet forthcoming payment deadlines
  • Sales and cash flow forecasts for the next 6 to 12 months
  • Details of other steps you're taking to reduce costs, e.g. renegotiating supplier agreements
  • A suggested repayment timeframe that's both affordable for your business and meets HMRC's requirement that you clear your tax liability as soon as possible
  • A statement of your commitment to completing the Time to Pay arrangement successfully, and to making all future tax payments on time and in full.

As well as considering our proposal, HMRC will also look at your company type and industry sector to assess your future viability and decide whether you present an acceptable level of risk. In some cases, they may require further information to make this decision.

Pros and cons of a Time to Pay arrangement

TTP Pros

  • Gives you time to get your finances back on track without the risk of legal action from HMRC
  • Avoids issues related to insolvency solutions
  • Will avoid additional late payment penalties
  • Covers PAYE, NIC, VAT and corporation tax liabilities
  • Helps you manage cash flow more effectively in future

TTP Cons

  • Interest will still be charged on overdue tax amounts for PAYE/NI and Corporation Tax (but not on VAT)
  • Payment plan is relatively short term and therefore you need to be sure that the business has the profitability to be able to afford it
  • Once in place there is no flexibility to the monthly payments, each must be made in full and on time
  • The arrangement may be cancelled if you don't keep to its terms, leading to formal recovery action
  • Some industry sectors are less likely to be granted an arrangement due to higher risk levels

Frequently asked questions

What types of business are eligible for a Time to Pay arrangement?

Time to Pay arrangements are open to sole traders, partnerships and limited companies. Some industry sectors present a higher risk than others and are therefore less likely to be approved for an arrangement. Please ask your Bridgewood debt advisor for further details.

Can I negotiate a Time to Pay arrangement myself?

Yes, but you stand a better chance of reaching a realistic agreement with HMRC if you let us act for you. This is because we have in-depth knowledge and experience of how HMRC work and how proposals for Time to Pay arrangements should be presented.

How long will my Time to Pay arrangement last?

The important thing to remember here is that HMRC require the highest possible payment amounts over the shortest possible duration. As a result, most arrangements are for 3 to 6 months, although you may be allowed up to a year. Arrangements longer than 12 months are extremely rare. So if you can't clear your tax bills within this time, we may need to look at a different solution, such as a Company Voluntary Arrangement (CVA).

Can a Time to Pay arrangement be cancelled?

HMRC may cancel the arrangement under certain circumstances. For example, if they suspect you've provided them with false information, if your circumstances change during the arrangement, or if you miss one or more payments. If your arrangement is cancelled, HMRC may require the total outstanding debt to be settled immediately, plus penalties.

Can a Time to Pay arrangement be changed or extended?

HMRC may agree to change or extend your Time to Pay arrangement due to an unforeseen change in your circumstances. However, this is rare and depends on the level of risk posed by your business and whether you still meet the Time to Pay criteria.

What happens if I ignore my tax payment problems?

If you miss a tax payment, the Real Time Information (RTI) systems introduced in 2013 mean that HMRC will know straightaway. They will view any failure to meet your tax liabilities as a sign of insolvency and won't hesitate to take formal debt recovery action, such as issuing a winding-up petition. If you're behind with your NIC payments, HMRC could also issue you with a personal liability notice. This is why it's so important to be proactive with HMRC and let them know as soon as any problems arise.

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