What is a Time to Pay Arrangement?

As a business owner, you have tax liabilities you need to keep up with. However, if you find that you are struggling to pay your tax bill on time, you will need to get in touch with HMRC as soon as possible; do not delay.

You may be able to negotiate a Time to Pay Arrangement (TTP). This is a payment plan which will allow you to pay back HMRC in instalments. This way you can spread out the payments over a longer period. 

This fix is only viable for companies that are experiencing temporary cash flow problems. Therefore the company will still need to be a solvent entity. 

If HMRC believes a company to be insolvent, they will take action into their own hands to recover money owed to them. 

TTPs are used to help pay back arrears of corporation tax, VAT and PAYE. You can also use them to avoid missed/late payment penalties. 

When dealing with HMRC the best advice to give would be to not wait for them to contact you. As soon as you know you will experience a problem. Get in touch with HMRC as soon as you can. This way you may be able to avoid any penalties by HMRC.

Typical Time to Pay Arrangement Timeline

A typical TTP arrangement term is between 3 to 6 months. However, there are some instances where you can get a term for 12 months. 

The time you are offered on the terms of your TTP will depend on your company's current circumstances. HMRC will look at your payment history and possibly the type of industry you work in. This will be to check how well your company and the industry as a whole has paid back tax owed in the past. 

If your company has a good history of paying taxes, filing paperwork on time and you have actively communicated with HMRC. Then this will all go in your companies favour, therefore providing reassurance to HMRC that you will pay back the TTP on time and consistently. 

Negotiating a TTP

If you decide you need more time to pay off your taxes, it is time to negotiate a Time to Pay Arrangement. 

You will be required to give HMRC a call should you wish to propose a TTP arrangement. In addition, you may also be asked to provide a written repayment offer and case. This should be accompanied by any cash flow records the company has. 

Furthermore, in your case, you should explain clearly why the company will not be able to pay off tax on time. Then you will propose a manageable amount the company can afford to pay back. It is important to not overestimate the amount you can payback. 

If HMRC believes you are offering too high a price, that you will not be able to manage. Then this could result in your proposal for a Time to Pay Arrangement, being rejected. The company will need to be realistic about how much they can commit to paying back.

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Failing to keep up with the arrangement

If your company regularly misses payments on a TTP arrangement and you make no attempt to get in touch with HMRC, this will result in them cancelling the arrangement. They may then take other measures to recover what the company owes them resulting in enforcement or adding penalties. 

It is important to remember that HMRC will waste no time in taking these actions, should you default on payments. So you must communicate your problems as soon as possible with them. 

It should be noted that the worst outcome, for a company failing to keep up with a TTP arrangement, could be legal action. These could come in the form of County Court Judgements, High Court Enforcement or Winding-up Petitions

If this is happening to your company then you must get in touch with an insolvency practice such as Anderson Brookes. We can help advise the best course of action to prevent goods being taken or the closure of your company.

Advantages of a TTP

  • Allow for payments to be made over a longer period
  • Gives some breathing space from the pressures of not being able to pay tax on time
  • A TTP will temporarily prevent legal actions
  • Penalties and surcharges can be avoided if the TTP is put in place before the tax payment is due
  • The company will still be allowed to trade
  • This will be an informal agreement between the company and HMRC, there will be no one notified of the situation. Therefore this will not affect your credit report
  • Formal insolvency procedures can be averted for the time being.

Disadvantages of a TTP

  • Payments need to be made in full and on time. 
  • HMRC can cancel the agreement at any given time. This is due to a TTP being an informal arrangement so there will be no legally binding contract between the company and HMRC
  • Enforcement may ensue if the agreement is cancelled
  • Chances of negotiating a TTP is more difficult if you work in a high-risk industry. Or you have a previous bad history with HMRC.

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