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HMRC: Time to pay

The UK Government has continually tried to implement a number of initiatives to help the economy, businesses and individuals weather the first half of 2020. Some of them like the Coronavirus Job Retention Scheme, SEISS, loans/self-assessment deferral and VAT deferral either apply automatically or can be leveraged to suit your business needs. However, in terms of liabilities for Corporation Tax or PAYE/NIC payments, no deferral has been granted and this poses a problem for businesses who have taken a big hit owing to cash flow problems arising out of the need to social distance and the lockdown.

When a company is experiencing cash flow problems, paying taxes such as VAT and PAYE, is often one of the first things that is hit and a common question that arises is this: Will more time be granted to pay liabilities, if it cannot be paid on time? The answer is that it is all in your hands.  You will need to make a formal request to the HMRC for a Time to Pay agreement that allows a taxpayer to spread their tax payment obligations over a longer period.

What is Time To Pay (TTP)?

It is an arrangement with HMRC for repayment of any outstanding tax, i.e. debt to HMRC, at a later date. Usually, HMRC allows a repayment schedule of up to 12 months. However, most times, the schedule is decided on a case to case basis depending on circumstances of the company.

TTP arrangements are not new. Since the financial crisis and flooding around 2008, HMRC have allowed companies and individuals to defer tax payments through this scheme and they can potentially apply to any type of UK tax or duty.

The main purpose of TTP arrangements is to increase the possibility for HMRC to collect money owed to them, by reducing the possibility of company insolvency. However, they do offer clear advantages to taxpayers including:

  • increased certainty over cash flow;
  • HMRC suspending further action to enforce the debt; and
  • avoiding late payment penalties and default surcharges.

 

TTP Eligibility

Any company or individual can contact the HMRC about setting up a TTP , as long as they have some outstanding tax liabilities and a strong case to prove why they are not able to pay on time. The acceptance of a request, however, depends on multiple different factors, such as past record of tax compliance, industry that a company operates in and current financial records in light of COVID-19.

Key Points Before Applying

When can one apply? At the earliest. As soon as you know and think you may face a challenge in making the deadline for tax payments, send in the request.

Documents and Details Required: Complete financial history and current financial situation including but not limited to details of bank loans presently held, details of application for additional bank funding, the sale of assets, etc.

Will there be a charge on interest? Every TTP arrangement will be accompanied by forward interest where appropriate.

Poor compliance with the rules and regulations surrounding your tax affairs i.e. fines and late filing of paperwork can not only affect your chances of securing a successful TTP arrangement but also deny you the credibility you need to benefit from the HMRC.

At DataTracks, our experts come with years of experience dealing with tax compliance issues. Get in touch with an expert at enquiry@datatracks.co.uk to discuss your specific situation and how you can proceed.