If you are unable to pay your taxes on time, you have the option of negotiating a Time to Pay with HMRC.
Put simply, this arrangement, is a debt repayment plan for your taxes. It is agreed between you and HMRC to allow you more time to pay your companies:
- Corporation tax
Time to Pay arrangements are based on the realistic ability to pay, the company stability and past payment history.
Due to the Coronavirus situation HMRC has expanded its access to its time to pay scheme. This includes a new helpline 0800 0159 559 so that businesses and those who are self-employed can arrange to defer tax payments. Breathing space is therefore given to SMEs around paying taxes
Is a Time to Pay arrangement right for you?
If your business has tax arrears that have accrued due to cash flow shortages, you could benefit from a Time to Pay arrangement.
You will only be considered for this if HMRC is confident you’ll be able to make sufficient repayments over the agreed period.
HMRC will not consider you if you have:
- A history of late, overdue or incorrect tax returns
- Not adhered to previous arrangements
- A lack of financial information to support your request
- Overdrawn directors' accounts
If you are not confident negotiating a Time to Pay with HMRC, or your offer is rejected, seek expert company recovery advice. Consultants can help you explore other options such as administration, restructuring or voluntary liquidation.
Negotiating a Time to Pay with HMRC
There are two main scenarios that might lead you to negotiating a Time to Pay arrangement with HMRC:
- You become aware that you will be unable to pay a debt when it's due.
- You miss a payment date and receive a payment demand – e.g. a tax bill, or letter threatening you with legal action.
In both cases, it's best to contact HMRC as soon as possible.
Those that the first scenario applies to, should call the Business Payment Support Service.
Those that the second scenario applies to, should call the HMRC department that sent the payment demand.
What you need to know before the call
You must be well-prepared for this phone call to ensure you answer any questions quickly and definitively, speeding up the entire process.
You will need to know:
- Appropriate reference numbers (e.g. your 10-digit unique taxpayer reference or VAT reference)
- The total amount of the tax bill you’re struggling to pay
- Reasons behind your inability to pay
- What you’ve done to try to raise the money to pay
- Your repayment offer – how much you can pay immediately, how long you need to pay the rest
- Your bank account details
During this call, you could also be asked to provide information about your:
- Income and expenditure
- Assets (such as savings and investments)
- Sales and cash flow forecasts for six months
- Plans to raise extra cash to meet your debts
The interviewer will also use this opportunity to advise you of your rights, and what the penalties may be if you don’t keep to the arrangement or falsify information.
HMRC will make its decision based on the information provided. If your offer is for 3-6 months, this can usually be arranged over the phone. If you’re trying to negotiate more than this (e.g. a 12-month arrangement), you'll need expert help and it will take longer to facilitate.
If HMRC thinks you can pay …You will have to pay immediately. This usually takes place over the phone, by debit or credit card.
If HMRC agrees you can’t pay …It will decide whether you would benefit from more time, or if you might still be unable to pay your debt irrespective of this. If the former, you will be granted a Time to Pay arrangement from HMRC. If the latter, or if you fail to make payments in line with the agreed schedule, HMRC will cancel your arrangement and may add additional penalties.This can eventually lead to severe legal action such as a enforcement order notice or winding up petition. That’s why it’s important to seek legal and financial help as soon as a situation like this arises.