Will HMRC Give Me Time To Pay My VAT and PAYE If My Company Is Struggling?

What is a Time To Pay Arrangement?

A Time to Pay Arrangement (TTP) 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.

How much time will I get?

This does depend on the circumstances.  HMRC will usually agree that you can pay it back over 6-12 months.  However if you instruct a professional turnaround advisor they can usually get longer i.e. 2 years, as they have a working relationship with HMRC and will not put forward proposals by companies that would struggle to pay.

So, if you can’t pay Paye or VAT then a Time to Pay Arrangement is an option.  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.

What are the criteria?

Companies in debt to HMRC must apply to set up a Time to Pay Arrangement. HMRC will only accept a proposal if it is satisfied that you’ll stick to the arrangement and repay all your taxes in full.

It is your job to convince HMRC to allow you to pay your taxes over time by putting forward a reasonable proposal.

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

It is very important not to offer to pay back more than you can afford. If you do then HMRC may reject the proposal putting you in a worse situation. It’s best to consult a financial or turnaround advisor to assess affordability levels.

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.

How do I pay?

Installments for 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.  It is likely that HMRC will want the Direct Debit set up on the day of the call.

How to qualify for the arrangement

HMRC will consider many different criteria when choosing whether to approve a Time to Pay Arrangement. These include:

• Compliance with tax rules and regulations.
  Actions such as filing taxes late and being fined suggests that your company is unreliable and so 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.

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.

Research and Development Tax Credits

These can be taken into account when agreeing a TTP but they have to be finalised and agreed. Consequently, they aren’t really a relevant negotiating tactic.

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, HMRC are looking to scale back their level of TTP Scheme as it does not look particularly fair to be raising taxes but not collecting actual tax owed.

What if HMRC does not accept a time to pay deal you can afford?

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 can 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 often carries more weight as they will not put forward unrealistic proposals.  In addition, advisors such as ourselves talk to HMRC all the time as part of their day job!

If this offer of a Time to Pay arrangement is refused, but the company is viable, your advisor may suggest proposing 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. 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.

More information from HMRC on Time To Pay Arrangements