What is a Time to Pay Arrangement?
A time to pay arrangement (“TTPA”) gives a company extra breathing space to settle existing liabilities with creditors. A TTPA is a debt repayment plan which provides structured tax payments outside the strict statutory framework. If you successfully negotiate a TTPA with HMRC it will relieve you of late payment penalties, however late payment interest is still chargeable.
What is the Government guidance on late payment of taxes?
On 20 March 2020 Rishi Sunak, the Chancellor of the Exchequer, announced various financial packages aimed at alleviating the pressures caused by COVID-19. One of the measures which he implemented was the deferral of tax payments to HMRC. This includes:
- Corporation Tax;
- Income Tax;
In the instance that you, like many others during the Covid-19 pandemic, cannot pay tax due to HMRC on time, agreeing a TTPA may be essential to the survival of your business. If agreeable, HMRC will usually allow you 6-12 months under the TTPA in which to settle outstanding debts owed.
What does a taxpayer need to do to arrange a TTPA?
HMRC will consider cases on a case-by-case basis but will assess them on the following criteria:
- Your business/industry – HMRC are less likely to offer you a TTPA if you are in a high risk industry due to competition, past experience or cash flow issues.
- History of compliance with tax rules and regulations – if you have previously filed your taxes late incurring penalties/fines, it would suggest to HMRC that you are unreliable and unlikely to adhere to the terms of the TTPA.
- Previous TTPA’s – if you had previously had a TTPA where you managed to pay the agreed instalments on time, this may work in your favour with HMRC.
- COVID-19 – HMRC will be far more lenient during this current pandemic and more willing to grant a TTPA, but again this will be determined on a case-by-case basis.
What if HMRC will not grant me a TTPA?
HMRC’s guidance on late payment of taxes states that they will consider your businesses balance sheet and assess whether you are likely to be able to pay your taxes fully in the future. If they do not think a TTPA would be suitable they will expect you to pay your tax bill straight away, and if you fail to do so they may start enforcement action.
What enforcement action will HMRC take if I cannot pay my taxes on time?
HMRC can enforce tax debts against individuals and companies in a number of ways and it is imperative that you seek legal advice from a specialist law firm at the earliest opportunity to protect your position.
If you have received a statutory demand, you must act quickly (usually within 18 days) if you hope to avoid HMRC bankrupting you as an individual or applying for a winding up petition if you are a company. With debt enforcement by HMRC it is inevitable that unless action is taken the demand will eventually lead to the presentation of a winding up against a company or bankruptcy petition against an individual.
Our tax team work closely with our insolvency team to manage the HMRC enforcement process for you. Many specialist tax firms cannot offer dual expertise in both practice areas, but our firm can provide a bespoke solution to your individual circumstances be it with tax advice or insolvency solutions.
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