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Time to Pay Arrangements & HMRC Debt

Falling behind on payments to HMRC is easy to do, with one of the most common reasons being a bad debt or unexpected expenditure having an immediate effect on business cash flow. In order to compensate for this and continue trading, essential payments such as suppliers, wages, rent and utilities are often prioritised over payments to HMRC. If not repaid quickly this situation can easily spiral out of control and become unmanageable.

What is a Time to Pay Arrangement?

The Time to Pay arrangement is a government initiative implemented in 2008. It was originally 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, such as:

  • You will be spreading out the cost of your liabilities over a period of time rather than all at once. This will improve cash flow and ensure your business has money to pay 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.
Time to Pay arrangements for HMRC Debt

The process of a Time to Pay Arrangement

Assess the situation
Firstly, contact us for an experienced insolvency consultant to explore your situation and recommend the best course of action. This will be via telephone conversation initially. A more thorough analysis is conducted later in a face to face consultation and a time and place to suit you.
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.
Our staff have years of experience working with the tax office of HMRC and utilise the strong relationships built over time. An experienced consultant will negotiate a structured repayment plan on your business’ behalf. It demonstrates to HMRC that you fully intend on repaying your debt. The intended repayment period will be outlined, as will the suggested repayment amounts and intervals.
Arrangement starts
If HMRC accepts the proposal, the Time to Pay arrangement will commence. Payments will start to be made by your business to HMRC on the agreed intervals over the agreed time period. The Time to Pay arrangement will conclude once all repayments have been made. Additionally, any interest will have been paid and tax returns submitted.

Is a Time to Pay arrangement right for me?

A Time to Pay arrangement is ideal for any type of business, be it 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. This assumes they feel they will receive their money owing in full within the time period. 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 may 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 discuss alternative solutions for your business. This is with the intention to turnaround the business and return it to profitability. As dedicated professionals, we will always be on hand to advise and guide you through the process.

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.

As soon as you become aware your business is unable to meet repayments, it is of vital importance that you contact us without delay. Utilising years of experience working with HMRC, we will capitalise upon relationships within the tax department. As a result, we may be able to renegotiate the terms of the Time to Pay arrangement. This may result in an extension of the repayment terms, buying your business time to get its finances straight. This will help to maintain a strong liquidity position in order to continue trading.

Here at Wilson Field our team are experts in business recovery and restructuring and have worked with countless businesses to streamline their operations. If HMRC refuse to accept the renegotiated terms of the Time to Pay arrangement, we can still give advice on alternative solutions which are available to salvage your business.

Wilson Field offer a fast and efficient service with nationwide coverage from a network of regional offices. So we can arrange a free consultation at a time and location most convenient to you.

Is a Time to Pay arrangement right for your business? Get in touch today to arrange a free confidential consultation with no obligation.

Authored by Fiona Grant

Fiona Grant

Licensed Insolvency Practitioner & Court Department Manager

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