HMRC time to pay arrangements: managing tax arrears

If your business is struggling to pay VAT, PAYE, or corporation tax on time due to genuinely short-term financial difficulties, HMRC’s Time To Pay (TTP) initiative may offer you a viable temporary solution.

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What is Time To Pay?

Time to pay (TTP) is a legal agreement in which you propose and make an instalment plan to spread the money you owe HMRC into payments over an agreed timescale.  Although each arrangement is judged by HMRC on its own merits, there are some typical elements:

  • Duration: arrangements are usually for 6 months or less, although in very rare circumstances HMRC has been known to allow up to 24 months.  Any late tax debt alongside any current debts are expected to have been repaid within the agreed timeframe.
  • Interest & Charges: a TTP will mean that you will still pay interest on the money you owe, but any penalties or surcharges that HMRC would normally make for late payments will not be added to your account.
  • Eligibility: any business can apply.  HMRC decides whether to accept, negotiate or reject the offer dependant on its own criteria.

What is HMRC’s criteria for a Time to Pay Arrangement?

An easy way to think about TTP arrangements is that they are meant to provide a one-off solution to a temporary situation, they are not a regular fix, or a means to keep a company solvent.

Essentially, you must be able to convince HMRC that your business is viable and profitable in the long-term but experiencing temporary cash flow problems in the short-term.  You also need to be able to satisfy HMRC that you will be able to stick to the arrangement to repay the money you owe in full.

Three of the key elements that HMRC will look at are:

  • Your compliance record: if you haven’t been making any efforts to repay tax within the last 12 months, HMRC is unlikely to support you.  It wants to see that you have at least been trying.
  • Communication: have you been keeping HMRC up to date with your business problems?  If you’ve been avoiding contact start a dialogue now, it will assist with the final outcome.
  • Truthfulness: this should go without saying, but if you purposefully under declare assets or income , HMRC will reject any proposal out of hand.

What does HMRC look for in a TTP application?

A good application for a TTP Arrangement will have:

  1. A clear explanatory narrative
  2. Financials (profit & loss, and cashflow projections)
  3. Letters of support from an accountant, and/or any potential funder

One final thought – don’t over promise!  HMRC is unlikely to give you another chance, so make sure whatever you are offering is affordable for the whole term.

If you have other debts or tax arrears, it is worth getting overall financial advice. You might find helpful information on these pages:

Or for more tailored advice, contact one of our expert advisors directly.