Frequently Asked Business Question:
My business has been adversely affected by the pandemic over the last 18 months and I am slowly trying to get my business going again to the levels pre-
March 2020. I am struggling with some arrears on my tax obligations with HMRC. What should I do and will HMRC give me time to pay?
What is a HMRC Time to Pay (TTP)?
If you are facing pressure from HMRC regarding your business’s unpaid tax liabilities, it is reassuring to know that options are available to steer you through this stressful time. Whilst HMRC have considerable powers in recovering debt owed to them, HMRC will also be willing to work with businesses who are in distress but there must be ongoing conversations. Open communication is key!
Since the start of the pandemic, HMRC has been operating a number of high-profile programmes, principally the furlough scheme (Coronavirus Job Retention Scheme), and the self-employment income support scheme (SEISS) through their various phases. HMRC are able to see this through VAT receipts and PAYE activity how businesses have accessed the support schemes and they are able to tailor their support to customers based on the information they hold.
How to Negotiate a Time to Pay Arrangement?
HMRC are offering case by case deferrals of tax payments where businesses can’t pay outstanding liabilities immediately, especially where the industry or the business sector has been adversely impacted by Covid19. HMRC says it will always try to set up a time-to-pay arrangement where possible and, across the whole of its debt management operation, teams have been retrained, not least to help them rethink what an appropriate time to pay arrangement looks like now, under pandemic conditions.
The introduction of HMRC’s Time to Pay (TTP) arrangement indicates an understanding of the problems facing businesses companies and a willingness to assist businesses facing genuine cash flow problems. A TTP arrangement can be implemented to cover a variety of outstanding tax liabilities including VAT.
This formal agreement with HMRC allows you extra time to pay your tax bill, with certain caveats:
- You must be completely honest with HMRC about your company’s financial position. If they suspect that your business may be already insolvent, or they agree to an instalment plan only to discover later that you misled them during negotiations, any arrangement will be cancelled and HMRC have the powers to force the business to be liquidated.
- Make contact with HMRC prior to a tax payment falling due. HMRC prefer to be contacted prior to a tax payment falling due, rather than deal with arrears. Although arrears can be included within a Time to Pay arrangement, contacting them as soon as you foresee a problem demonstrates a degree of financial control and transparency of operations.
- Only ask if your business is temporarily unable to pay its tax liabilities. Time to Pay arrangements are only offered to businesses temporarily unable to pay their tax liabilities. If an instalment plan is agreed, and you spend money on something other than your tax bill, you will be penalised if this comes to light.
An extended payment period of up to a year is common with a Time to Pay arrangement, and although the overall debt is not reduced, this added time relieves some of the pressures on a company that is already struggling.
Defaulting on a Time to Pay Arrangement?
It should be noted that a failed TTP arrangement can be disastrous for a business and can lead to HMRC attempting to close the business in order to recoup its debt. This is why you need to ensure that no payments are missed or late for the entire term of the arrangement.
HMRC uses a number of analytical models that work alongside speaking to customers, to test businesses prospects. These are currently not being used as HMRC focuses on supporting customers but, at some point, they will be brought back into service. HMRC are currently at pains to point out that firmer action is always a last resort and within the context of conversations and contact.
Where HMRC haven’t had payment, or where they persistently haven’t had contact, that will be factored in when they start to return to make visits in person to businesses. But they do note that they are not ready to move to enforcement action where customer engagement takes place. The key message is to speak early and speak often to HMRC where it becomes clear that payment of your taxes may be delayed.
How to Contact HMRC about a Time to Pay Arrangement?
Before speaking with HMRC you’ll need to ensure you have all your information to hand, including your reference number, bank details, and a clear explanation of what you’ve done to try and pay the bill so far.
With this information to hand, HMRC’s Payment Support Service (PSS) can be contacted on 0300 200 3835.
Here to Help
As always, the team at FPM are here to help with all your finance and tax queries. For more information and assistance, please contact our Tax Team who will be pleased to help you.