Many businesses will find themselves with tax arrears, as paying them off is often deprioritised in favour of other running costs. However, doing so is likely to impact cash flow and can worsen your relationship with HMRC. If you are falling behind with your business’ payments to HMRC, you may be able to relieve some of the pressure if you set up a Time to Pay Arrangement (TTP).

Read more about Time to Pay Arrangements

What can you use a Time to Pay Arrangement for?

You can set up a Time to Pay Arrangement to help repay any tax arrears, or upcoming payments you won’t be able to cover. These can include corporation tax, VAT, PAYE and income tax. In concept, a TTP is designed to alleviate the pressure by spreading the costs of debt repayment over a longer period.

Do I qualify for a Time to Pay Arrangement?

Any business can apply for a TTP, regardless of whether you’re a sole trader, a partnership, limited company or limited liability partnership (LLP).

Whether or not you’ll qualify for a TTP depends largely on why you’ve not paid your HMRC bill. If you’re able to pay your tax but are refusing to, then it’s unlikely a TTP application would be accepted. If, however, you’re unable to pay your bill, then HMRC is more likely to consider and approve the application.

What can happen if you’re unable to pay your HMRC bill

What you need to know before applying

HMRC will consider all applications for a TTP. For a higher chance of having your application approved, you should approach HMRC before your bill is due. It also helps you avoid fines associated with filing taxes late, which could happen if you apply after your billing due date.

Before you apply to set up a Time to Pay Arrangement, you will have to make a strong case to HMRC to justify your application. This case should include evidence to prove you’d be able to meet the repayments and are willing to make changes to your business to avoid future reoccurrence. You can increase the chances of your application being accepted by including cash flow forecasts, details of plans to generate extra monies and proposals on how you would save money and cut costs to fund a prospective arrangement. HMRC offer Time to Pay Arrangements as a method of overcoming short-term problems and will want to be comfortable that the business is viable.

Before deciding whether to accept your application, HMRC will investigate your track record with them. If you’ve submitted late returns in the past or not responded to correspondence from them, it will count against your application. HMRC can also turn down your application if they’re unconvinced you’ll be able to afford the monthly repayments.

What can happen if your Time to Pay Arrangement is refused?

Once the Time to Pay Arrangement comes into effect

Once HMRC approves the TTP, and it comes into effect you will be expected to pay in instalments, timescales will vary depending on your specific arrangement and circumstances, though the agreed time period is generally between six and 12 months.

You should inform HMRC as a matter of urgency if your circumstances change during the arrangement, or you’re unsure whether you’ll be able to afford the repayments. HMRC may be able to renegotiate the arrangement to make it more affordable.

What if your Time to Pay Arrangement fails?

Alternative solutions

Time to Pay Arrangements can only be used to relieve HMRC specific debts. If you have debts to other parties, or you’ve had a TTP which has failed, other debt-relief options may be more suitable for you.

Company recovery

If you’re looking to pay off your debt while continuing to trade, there are alternative arrangements. You can apply for a Company Voluntary Arrangement (CVA), in which you stay in control of the company, continuing to trade while you repay your debts. Alternatively, if your business would benefit more from restructuring, company administration may be a suitable solution.

Read more about company recovery options

Company closure

Sometimes, the company’s debt can be so substantial that it’s not possible to continue trading, and you may be better off closing the company through a Creditor’s Voluntary Liquidation (CVL). Doing so would involve selling off company assets before creditors force it into compulsory liquidation.

Read more about company closure

In summary

If your business is viable but is struggling to pay its dues to HMRC, you should speak to us to help set up a Time to Pay Arrangement (TTP). You can use a TTP to repay corporation and income tax, as well as VAT and PAYE. You’ll have to apply to HMRC for a TTP and preparing a strong case to present to them will help convince them you would be able to repay the amount owed. Once a TTP is agreed, you will have to keep up with the repayment plan agreed with HMRC. If the repayment plan becomes unaffordable, you should contact HMRC before missing a payment; otherwise, your arrangement could be cancelled.

How we can help

Our team of consultants and insolvency practitioners have the expertise and experience to keep your business operating while repaying your debt. We have developed a strong position to negotiate with HMRC over the years, and 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. Get in touch with us for free, confidential advice with no obligation.

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