We have previously written about how HMRC is frequently the main creditor when businesses find themselves in financial difficulties. 

This is not only down to lots of businesses owing overdue corporation tax – but also because HMRC is the creditor for other official taxes such as VAT and PAYE/National Insurance Contributions arrears too. 

Being behind with repayments for any of these means that HMRC will be seeking repayment and as one of the most tenacious and unrelenting creditors in the UK, you will be constantly contacted and pursued by them. 

This will only end with either repayment or if, as happens quite frequently, HMRC brings legal action against the business in the form of a winding up petition to close the company down and sell off any assets to repay the debts. 

But owing money to HMRC can also provide a unique and advantageous way to settle the debt that isn’t automatically or widely available elsewhere. 

It’s called Time To Pay and while it could work for some companies, it’s not a certainty so read on to find out more.

What is a Time To Pay Arrangement?

A Time To Pay (TTP) Arrangement is a formal legal agreement entered into when a company that owes money to HMRC agrees to a series of regular instalments of the debt on an agreed repayment timescale.

The initiative was designed to offer a viable to temporary solution to directors or business owners who owe money to HMRC but can’t repay in full on demand.

During a TTP any penalties or surcharges that HMRC would usually levy for late payments will not be applied but interest would still continue to be accrued on any outstanding arrears. 

How do HMRC work out debt repayments ?

It’s important to stress that a TTP is not an automatic right or will not necessarily be granted. 

HMRC will review every proposal and ask important questions to ensure that the instalments are affordable as well as ensuring that the debt will be paid as quickly as possible. 

The length of the arrangement will depend on how much the business owes and its overall financial circumstances. In most cases the duration of a TTP can be anywhere between six to 24 months and is reviewed regularly in case the circumstances change. 

During these reviews HMRC may decide to adjust the agreement. For example, if the business financial position improves dramatically it may be shortened or alternatively they may choose to lengthen the duration if the business’ financial position worsens but remains in a position to recover.

What happens if HMRC denies my company a Time To Pay Arrangement?  

Any business with outstanding debt to HMRC has the right to apply for a TTP arrangement, whether they will get accepted or rejected is entirely dependent on HMRC and their own internal acceptance criteria.

There are multiple reasons for an application to be rejected but in most cases it is because HMRC has valid reasons to doubt the company’s ability to clear the entire balance in a timely manner. Sometimes this is not just financial, a business might have the financial headway to make regular payments but if it has a history of failing to pay debts on time then this could indicate to HMRC that the company is not reliable.

If a business has their Time to Pay application rejected, or believes that their application is likely to be rejected, they need to consider alternative courses of action which could be available. 

These include other formal insolvency solutions such as an Administration to allow the business time to restructure or a Creditors Voluntary Liquidation if formal closure is the only realistic way forward. 

If you are feeling the pressure from HMRC and are worried about what the future holds for your business – we can help. 

We offer a free initial consultation for any director or business owner who wants to arrange one

One of our expert advisors will work with you to better understand the situation your business is in and what options you could have available to improve your position.

You will most likely have more choices than you think but to get the ball moving you have to get in touch first.