A HMRC Time to Pay (TTP) arrangement is essentially a lifeline for businesses struggling with tax liabilities.
It’s a formal agreement made between a company and HM Revenue and Customs (HMRC) that allows for tax debts to be paid over an extended period. This approach is particularly beneficial for directors of companies facing insolvency, as it offers an opportunity to manage outstanding tax liabilities in a more manageable way.
How do I set up a Time to Pay Arrangement with HMRC?
Setting up a Time to Pay (TTP) arrangement with HMRC is a nuanced process that varies depending on the type of tax debt you owe. The initial step remains the same: conduct a comprehensive assessment of your company’s financial status.
This evaluation is critical to formulating a realistic proposal that illustrates your capability to clear the debt within a specified timeframe. It’s highly beneficial to engage with an insolvency practitioner, who can aid in accurately preparing and presenting your case to HMRC.
1
Self Assessment Tax Debts:
If your tax debts arise from Self Assessment, you may be eligible to set up a payment plan online, provided you meet specific criteria:
- Tax Return Submission: Ensure you have filed your latest tax return.
- Debt Limit: The owed amount must be £30,000 or less.
- Timeframe: You should be within 60 days of the payment deadline.
- Other Debts: You must not have any other payment plans or debts with HMRC.
- During the setup process, HMRC will inquire about your income and expenses to determine an appropriate payment plan.
2
Employers PAYE Contributions:
For businesses owing employers’ PAYE contributions, the following conditions apply to set up a payment plan online:
- Missed Payment Deadline: This applies if you’ve missed the deadline for an employer PAYE bill.
- Debt Limit: The debt should be £50,000 or less.
- Repayment Period: Plan to pay off the debt within the next 12 months.
- Age of Debts: The debts should be 5 years old or less.
Submission - Compliance: Ensure all employers’ PAYE submissions and Construction Industry Scheme (CIS) returns are up to date.
3
VAT Tax Debts:
Businesses with VAT tax debts can set up a payment plan online under these conditions:
- Missed Payment Deadline: Applicable if you’ve missed the deadline to pay a VAT bill.
- Debt Limit: The debt should be £50,000 or less.
- Repayment Period: Plan to pay off the debt within the next 12 months.
- Period of Debt: The debt must be for an accounting period that started in 2023 or later.
- Tax Return Filing: Ensure all tax returns are filed.
Note: Businesses in the Cash Accounting Scheme, Annual Accounting Scheme, or making payments on account cannot set up a VAT payment plan online.
Questions & Answers about HMRC Time To Pay Arrangement
Here are some frequently asked questions that will help you understand Time To Pay Arrangements.
What is a TTP Tax Payment Plan?
A TTP Tax Payment Plan is a structured plan that allows businesses to clear their tax debts in instalments over a period, rather than a single lump sum. This plan includes all forms of taxes such as corporation tax, VAT, and PAYE. The key is to ensure the plan is affordable and does not further jeopardise the company’s financial position.
Can HMRC Cancel a Time to Pay Agreement?
Yes, HMRC retains the right to cancel a TTP agreement under certain conditions. Key triggers for cancellation include missed payments, failure to comply with current tax obligations, or significant changes in your financial situation that were not disclosed during negotiations.
To avoid this, engage in regular communication with HMRC, especially if there are any changes in your business that might affect your ability to meet the TTP terms. Promptly addressing potential issues and proposing adjustments can help maintain the agreement.
Negotiating More Time-to-Pay Company Tax Debts with HMRC
Negotiating a Time-to-Pay (TTP) arrangement is more than just a financial transaction; it’s a strategic dialogue with HMRC.
When entering negotiations, transparency and honesty about your company’s financial health are paramount. Prepare detailed financial statements, cash flow forecasts, and a realistic repayment plan. HMRC will evaluate your company’s past tax compliance, current financial condition, and the specific challenges preventing timely tax payment.
This process may include discussing any unforeseen circumstances, such as market downturns or internal business disruptions, that have impacted your ability to pay. It’s also important to demonstrate a commitment to future tax compliance and show how the TTP arrangement will support the long-term viability of your business.
What if HMRC Rejects or Refuses My Company a Time to Pay?
If HMRC declines your TTP proposal, it’s essential to understand their rationale. Common reasons for rejection include a lack of credible financial information, doubts about your company’s viability, or previous non-compliance with tax obligations. In such cases, reevaluating your proposal with the help of an insolvency practitioner could be beneficial.
They can provide insights into HMRC’s decision-making process and help you prepare a more compelling case, perhaps by offering additional financial information, restructuring the proposed payment schedule, or demonstrating more robust financial controls. Remember, a revised proposal should address HMRC’s concerns while still being feasible for your business.
How Much Additional ‘Time to Pay’ Will I Be Given?
The length of a TTP arrangement is tailored to each company’s situation. While HMRC typically considers agreements up to 12 months, they may extend this period based on the specifics of your case. For instance, if your business has a solid track record and a clear plan for future profitability, HMRC might be more inclined to offer a longer repayment period.
It’s essential to propose a timeframe that aligns with your company’s projected cash flows and earning potential, ensuring that you can meet the obligations without jeopardizing your business’s operations.
What Happens if I Fail to Keep Up with the Time to Pay?
Failing to adhere to a TTP schedule is taken seriously by HMRC. If payments are missed or delayed without prior agreement, HMRC may move to terminate the arrangement. This action can initiate a more aggressive debt recovery process, potentially leading to legal proceedings or enforcement actions.
Such outcomes could significantly harm your business’s credit rating and might even result in insolvency proceedings. Therefore, maintaining the agreed payment schedule is crucial for the financial health and reputation of your company.
Authorised by the Insolvency Practitioners Association
Members of the Association of Business Recovery Professionals (R3)
Member of Association of Chartered Certified Accountants
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