Time to Pay Arrangement & HMRC debt
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Falling behind on payments to HMRC can easily occur, often a result of bad debt or unexpected expenditure having an immediate negative effect on business cash flow. In order to continue trading, essential payments such as suppliers, wages, rent and utilities are often prioritised above payments to HMRC. If not repaid quickly, this situation can easily spiral out of control and become unmanageable.
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What is a Time to Pay Arrangement?
The Time to Pay arrangement is a government initiative implemented in 2008. It was initially an attempt to combat the effects of the recession. It works by allowing struggling businesses to repay their outstanding corporation tax, PAYE/ NI or VAT liabilities in instalments, rather than in one go. Usually, Time to Pay arrangements last either 6 or 12 months. However, they may last longer if there is a realistic prospect the debt will be repaid eventually.
What are the advantages of a Time to Pay Arrangement?
HMRC liabilities will not simply disappear overnight but seeking a Time to Pay arrangement has its advantages.
- You will be spreading out the repayment of your debt over a period of time, rather than all at once. This will improve cash flow and ensure your business has money to pay other outgoings such as rent, wages and suppliers.
- Opting for a Time to Pay arrangement will demonstrate a willingness to repay liabilities. This helps your business remain on good terms with HMRC.
- Proactively seeking Time to Pay will decrease the likelihood of HMRC taking enforcement action against your business.
Our process of a Time to Pay Arrangement
- Assess the situation
- It is important to explore the financial situation of the business and what will be suitable for your business. If you would like some help to establish if a TTP is viable, contact us now for an initial informal chat.
- Repayment proposal
- We will assess your business’ finances and any correspondence with HMRC and will then devise a repayment proposal to be put forward to HMRC. Included within the proposal would be details of the circumstances surrounding your cash flow difficulties.
- Negotiation
- Our staff have years of experience working with HMRC and utilise the strong relationships built over time. An experienced consultant will negotiate a structured repayment plan on behalf of your business. It demonstrates to HMRC that you fully intend on repaying your debt. The proposed repayment plan will outline the suggested repayment amounts and term requested.
- Arrangement starts
- If HMRC accepts the proposal, the Time to Pay arrangement will commence. The Time to Pay arrangement will conclude once all repayments have been made. Additionally, any interest will have been paid and tax returns submitted.
More on how to set up a Time to Pay Arrangement
Is a Time to Pay arrangement right for me?
A Time to Pay arrangement is ideal for any type of business – a sole trader, partnership or limited company. It is useful for businesses where tax arrears have accrued during a cash flow shortage. This may be as a result of a bad debt or an unexpected expenditure. As a consequence of this cash shortage, NI contributions/ VAT or PAYE arrears may have accrued with HMRC. However, if the business has reasonable prospects of returning to financial stability, HMRC will usually accept a Time to Pay proposal. It will also assist with the proposal if the submitting of tax returns have been on time and paperwork is up to date.
What if HMRC refuse to accept my proposal?
HMRC may refuse to accept a Time to Pay arrangement. Factors which could work against you could include:
- Tax returns being late or overdue
- The debt has not arisen due to short term financial difficulty
- Previous arrangements not kept
- Lack of financial information to support your request
- Proposal considered unachievable by HMRC
Should HMRC refuse your proposal, we will be able to discuss alternative solutions for your business. This is with the intention of turning around the business and return it to profitability.
What if HMRC refuses your TTP proposal?
What if I’m nearing the end of a Time to Pay Arrangement and have missed some instalments?
Your business may be approaching the end of a Time to Pay arrangement with some repayments missing. A failure to take pro-active steps is likely to result in HMRC seeking to carry out enforcement action.
If you have missed any of your TTP payments, it’s crucial to make contact with HMRC as soon as possible. With our help, you may be able to renegotiate an extension of the TTP. This could buy your business that extra bit of time which allows you to get your finances on the right track and maintain a strong liquidity position.
What can happen if your TTP fails?
Alternative solutions
Time to Pay Arrangements are solely for debts to HMRC. If you have debts to other creditors, or you’ve previously been in a TTP which has failed, you could benefit more from other debt-relief options.
Company recovery
If you’re looking to continue trading while paying off your debt, there are several options open to you: You can apply for a Company Voluntary Arrangement (CVA), which allows you to stay in control of the company and continue trading while paying off your debts. Alternatively, if your business would benefit more from restructuring, you can explore administration as a solution.
Read more about company recovery options
Company closure
If the company’s debt has reached such a level that it’s not possible to continue trading, you may be better off closing the company through a Creditor’s Voluntary Liquidation (CVL), selling off the assets before creditors force the company into compulsory liquidation.
Read more about company closure
In summary
A Time to Pay Arrangement will give your business a chance to repay any missed tax liabilities such as PAYE, VAT, NI or corporation tax. If your business is genuinely viable, an arrangement could be made which enables you to pay in monthly instalments. It’s critical not to miss any payments as it could mean the arrangement breaks down.
How we can help
If you are looking to negotiate a Time to Pay Arrangement with HMRC, or are concerned about your current arrangement, we have the experience and expertise to help you through the process. We have developed strong relationships with HMRC, to put us in a great position to negotiate. If HMRC refuses to accept to terms of the TTP, we can still give advice on alternative solutions which could help salvage your business.
Fiona Grant
Licensed Insolvency Practitioner
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