Will HMRC give me time to pay my VAT and PAYE if I can't pay it right now?
A Time to Pay Arrangement with HMRC is a debt repayment plan for your outstanding taxes. Companies that have defaulted on their payments to settle their Corporation Tax, VAT and/or PAYE can ask HMRC for extra time to pay. They will usually agree that you can pay it back over 6-12 months.
Time to Pay Arrangements are made directly with HMRC. Take a look at their Business Payment Support Service to make sure you're choosing the right path. They have set up a helpline at 0800 0159 559.
HMRC have also set up a help line specifically for the self employed and businesses who will be struggling due to COVID19, including giving advice on tax and benefits you can claim for. The helpline can be reached on 0300 456 3565.
What are the criteria for an HMRC Time to Pay Arrangement?
Companies in debt to HMRC must apply to set up a Time to Pay Arrangement. This will only be accepted if HMRC is satisfied that you'll stick to the arrangement and repay all your taxes in full.
It is your job to convince HMRC that it can be done by putting forward reasonable proposals that set out exactly what you can afford to pay. It is very important not to offer to pay back more than you can afford as HMRC may reject it and you could end up in a worse situation. It's best to consult a financial or turnaround advisor to assess affordability levels.
Your proposals should be supported by evidence that these payments can be met, including:
- Forecasting sales
- Examples of how you can cut costs elsewhere
- A convincing argument proving your determination to pay your taxes
If accepted, HMRC will give your company a period of time to pay your taxes. This is usually between 6–12 months, but in some cases it can be longer.
Time to pay arrangements are taken by direct debt. This is to ensure a smoother process for both customers and HMRC, as it means payments cannot be late.
Do you qualify for an HMRC Time to Pay arrangement?
HMRC will consider many different criteria when choosing whether or not to allow you to set up a Time to Pay arrangement. These include:
- Compliance with tax rules and regulations; Actions such as filing taxes late or having received fines previously suggests that you/your company is unreliable and unlikely to meet the terms of your agreement.
- Your line of business/industry – Some businesses and industries are higher risk due to competitiveness, past experience and cash flow issues.
- Past experience of Time to Pay Arrangements – If you have had a Time to Pay arrangement before you will still be considered, but this may affect your application.
- Coronavirus - It is likely that HMRC will allow companies more time to pay overdue tax due to the virus but again this will be on a case by case basis. HMRC was lenient to some companies affected by the Carillion collapse
Understandably, HMRC is not willing to offer payment plans to high risk businesses. It can also be difficult to reach a Time to Pay agreement with HMRC because of the public pressure on the 'taxman' to collect all outstanding taxes promptly.
If your company can't pay corporation tax that is due from the previous year, this can also be included in a time to pay arrangement. This situation is more common for those that are contractors/consultants in industries such IT/Banking. If this is you, then call us on 08009700539 to talk to an advisor.
What could let your company down?
Poor compliance with the rules and regulations surrounding your tax affairs i.e. fines and late filing of paperwork. HMRC will also take into consideration your line of business and their history of meeting TTP arrangements. It only makes sense really that they are going to be less likely to affectively "lend" to business that are deemed high risk.
If your company has had a time to pay deal (TTP) in the past they will still consider you for another TTP. However it is common knowledge that the HMRC are looking to scale back their level of TTP Scheme as it does not look particularly fair to be cutting public services but not collecting tax owed.
What if HMRC does not accept a time to pay deal you can afford? Now they want faster repayment!
If you have tried on your own to establish a Time to Pay arrangement and it has been rejected, you should conduct a turnaround advisor immediately. They will conduct an audit of your financial situation including a statement of affairs and a financial forecast.
Your advisor will then approach HMRC on your behalf. Their evidence may be seen as more acceptable as external professional advice can show that the business is viable and able to repay debts over a comfortable period.
If this offer of a Time to Pay arrangement is refused, but the company is viable, your advisor may suggest issuing a company voluntary arrangement (CVA). This is a formal insolvency tool used to restructure businesses, debts and recover from cash flow issues.
Sometimes the threat of insolvency, in the form of a CVA, can push HMRC to accept a Time to Pay agreement. This is because with a CVA the return will be over a 3–5 year period, and may not cover the whole debt. Also, if the business did eventually become insolvent, HMRC may be left with nothing at all. Therefore, it is possible to persuade HMRC that a Time to Pay agreement is the best way to ensure it recovers all of the company's outstanding taxes within a reasonable time frame.
Even if a CVA does not encourage HMRC to accept your offer, it may be exactly what your business needs. Here's one example of where the rejection of a Time to Pay agreement benefited one of our clients immensely:
Having tried and failed to negotiate a time to pay arrangement with HMRC, we got in touch with KSA group in order to discuss our options on restructuring the debt we had. As a Managing Director responsible for the livelihoods of a group of people I'd spent years working with, this period was fraught with stress, worry and uncertainty. Finding the right partner to help us get back on our feet was singularly the most important decision in our Company's history- and undoubtably by selecting KSA one we got right. Their experience and depth of knowledge of the CVA process was apparent from our first formal meeting, and they were able to deftly guide us through the process. Their people were responsive to our queries, empathetic with the situation we were in, and critically able to develop a document for presentation to creditors that undoubtedly made the difference between failure and success.
On a personal note, being able to trust your advisors to 'handle it' allows you to focus on the business- critical to getting out of the situation. I know first hand the emotional turmoil and stress caused by the threat to your business, and if you are reading this and fancy a pint with someone who has been there and come through it, get in touch with KSA Group and I'd happily meet up for a chat
So what is our Plan A option?
Effectively this is where formal insolvency is avoided by doing a deal with creditors to pay the debts back over an agreed time period. Plan A option does depend on the debt being paid back in full over a relatively short time period of say 6-18 months. Although a year is often the norm. We will need to do much of the work of a formal insolvency, including a statement of affairs for the company as well as financial forecasts. This work can be used as a "Sword of Damocles" . Every time a creditor threatens legal action, we can show them how the company can pay them back over a period of time. If the business is forced into insolvency, the chances are the return will be less. Plan A may turn into the CVA option, where the return will be over 3-5 years and not necessarily the whole debt.
Do you think an HMRC Time to Pay arrangement is right for your business?
If your company is having cash flow problems concerning PAYE and VAT, you should consider applying for an HMRC Time to Pay arrangement. To help you achieve a successful outcome with HMRC, we've created an easy to use time to pay pack to obtaining an HMRC Time to Pay deal;
- Give you a detailed, professional system to set out the deal; including letters, board resolutions and tools you need to protect directors, partners/sole traders
- Help you improve cash flow and stop HMRC making threats
- Give you back the time you're wasting fighting cash flow disputes
- Teach you the language of the experts when they talk to tax collectors, and the confidence you need to succeed
- Help target your proposal to the right department, then follow it up and get it approved
- Protect you from personal risk and wrongful trading
Register for the guide today by emailing us directly at firstname.lastname@example.org
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