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What if an HMRC Time to Pay Arrangement fails?

Time to Pay Arrangements (TTP) are designed to help viable businesses that are facing temporary cash flow problems. If these issues are making it difficult for your business to meet its tax liabilities when they fall due, then a TTP could help you. That said, you need to apply for a TTP, and HMRC must approve the arrangement before it can be actioned. You must maintain the payments; otherwise, the TTP will fail, meaning you may have to explore other insolvency options.

The arrangement allows your business to negotiate with HMRC to pay your tax bill over a longer period, usually, 6 – 12 months, if you can prove you can afford to pay the bills. TTPs can be used for VAT, PAYE and corporation tax arrears, and it can also be used in anticipation of problems with upcoming payments. Whether your business operates as a sole trader, a traditional partnership, a limited company, a limited liability partnership (LLP) or any other form of association, a TTP is available to you.

More information on Time to Pay Arrangements

Can I change an existing Time to Pay Arrangement?

If you are worried about accumulated tax arrears, contact us immediately. Even if you are in an existing TTP arrangement and you have not managed to meet all the terms, we may be able to arrange an extension.

We will put together a proposal which focuses on:

  • Your sales and cash flow forecasts for the period requested.
  • Demonstrating how your business will meet the TTP payments.
  • Showcasing your willingness to meet the repayments.
  • Your track record with HMRC.

When we negotiate with HMRC, they will look at the proposal, your sector and your history of debt repayment.

You should only offer to pay what you can afford per month after your liabilities and obligations.

If HMRC accepts the proposal, they are likely to continue charging interest on your debt, but they may lift any penalties you have been given, especially if you contact HMRC quickly to deal with your debt. It is important you meet the terms of the proposal and pay on time. If you default on a TTP, then HMRC can cancel the arrangement and apply penalties.

More on setting up Time to Pay Arrangements

What is the cost?

The cost of us assisting you with a TTP depends on the complexity of the case, which frequently relates to the amount involved. Whatever the situation, we provide a fixed price quote for you once we have more information. Any initial meeting conducted with you will be free of charge.

What if a Time to Pay Arrangement fails?

If you regularly miss payments on a TTP and made no attempt to contact HMRC, they may cancel your arrangement and push ahead with measures such as a winding-up petition (WUP). If this happens, you should get in touch with us without delay if you are to have a chance of saving your company.

Time to Pay Arrangement Fails

Refused a Time to Pay Arrangement, what next?

If HMRC has any doubts about your company or the proposal you have put forward, they will reject your application. Rejection of the application can be a cause for concern as you may now struggle to see a way to get your business back on track.

Time to Pay proposals are usually rejected because:

  • HMRC has reason to doubt your ability to clear the debt in the period suggested.
  • Your previous track records with HMRC, particularly if you have a history of late submissions of your tax returns, failure to respond to correspondence, not keeping to previous arrangements or not keeping HMRC informed of your financial situation.
  • It appears that the business is not viable and is not capable of making a profit, rather than just suffering from short term problems.

More reasons why a Time to Pay Arrangement could be refused

Options if an Arrangement is rejected

If HMRC rejects your Time to Pay application, other debt-relief options allow you to relieve your liabilities; these may involve business restructuring.

Company recovery

If you wish to keep the company running, you could explore applying for a Company Voluntary Arrangement (CVA), a formal agreement which consolidates your debts into a single monthly payment to your creditors. HMRC debt can be included in a CVA, though they may reject it if they’re your only creditor and a TTP has already been rejected.

Read more about Company Voluntary Arrangements

Help for sole traders

The CVA equivalent for sole traders is an IVA (Individual Voluntary Arrangement). Like a CVA, it allows you to repay your debts in monthly instalments over five years. After five years, the remaining debt is written off, allowing you to make a fresh start. Again, HMRC needs to approve the IVA if their debt is included, and if they’re the only creditor they may reject it.

Read more about Individual Voluntary Arrangements

Company closure

If your debt is substantial enough that your business can’t continue operating, you may want to apply for Creditor’s Voluntary Liquidation (CVL), which will stop all trading and close your company in an orderly process and is generally favourable than a compulsory liquidation, which HMRC may pursue.

Following the issuing of a WUP, a compulsory liquidation means you have no control over the process, and you’re very unlikely to continue trading afterwards.

Read more about Creditors Voluntary Liquidation

In summary

A Time to Pay Arrangement (TTP) is designed to let a business pay off its liabilities to HMRC. You have to apply for a TTP, and HMRC may reject your application if you have a history of late submissions and ignoring their attempts to contact you. If you’ve had a TTP approved and you don’t keep up with the payments, the arrangement will fail, and HMRC may begin proceedings to recover what they’re owed. If your application is rejected, you can apply for other debt relief arrangements, or apply to close your company voluntarily before HMRC forces the company to close via a winding-up petition.

How we can help

If you’re worried your Time to Pay Arrangement with HMRC is failing, and are unsure what to do next, contact us. Our team of consultants and insolvency practitioners have years of expertise and experience, and a strong position to negotiate with HMRC, they can help you move on if your arrangement fails. Get in touch with us for free, confidential advice with no obligation.

Beverley Horton

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