Negotiating a Time to Pay with HMRC

Negotiating a Time to Pay with HMRC. Written by John A Waller, Director. Reviewed November 22nd, 2022.

HMRC Time to Pay (TTP) arrangement

Arranging a HMRCTime to Pay (TTP) arrangement provides a company with extra time to correct its tax arrears. TTP usually last around six months, although HMRC can provide plans of up to 12 months in certain instances. The company must repay tax arrears and make any tax payments due during the arrangement.

Two main situations that may require you to commence to arrange negotiating a Time to Pay with HMRC arrangement.

  • It is brought to your attention that you remain unable to pay your tax when it is payable;
  • You fail to pay by the payment date and receive an HMRC payment demand threatening possibly notice of intent to commence an action to recover tax owed legally.

If you are unable to pay your taxes on time? You have the opportunity to negotiate a time to pay with HMRC.

This arrangement remains a repayment plan for your taxes. It is therefore agreed between HMRC and you too, then give extra time to secure payment of your company’s outstanding taxes.

If self-employed and unable to pay your taxes on time, you may negotiate a ‘Time to Pay’ as well.

A Time to Pay arrangement with the HMRC remains a debt repayment plan for your unpaid taxes agreed between the HMRC and you.

So if you then have difficulty paying your taxes and have to negotiate a Time to Pay Agreement with HMRC, please read on to find out how.

What is ‘Time to Pay?

HMRC remains the largest creditor in the UK. Therefore, if your business is battling to stay trading, then perhaps a ‘Time to Pay arrangement may be the answer to your issue. A TTP arrangement is the same as any other debt repayment plan, except it is specific to the repayment of outstanding tax liabilities. Usually paid by instalments monthly up to 12 months. Normally, the HMRC approves a TTP for arrears of the following tax:

  • Income Tax;
  • Corporation Tax;
  • VAT;
  • PAYE and NIC. 

A TTP often protects the taxpayer from late payment penalties. However, interest remains payable.

Therefore, noting other taxes require paying when due, failing then means the arrangement remains defaulted.

Debts that can be included in an HMRC time to pay arrangement

Any tax, duty, surcharges or penalties you can’t afford to pay can be included.

HMRC Time to Pay and Coronavirus COVID-19 Pandemic

Since the Coronavirus pandemic, HMRC has extended it’s Time to Pay scheme in the UK to help companies.

Sole traders could defer self-assessment payments due from July 2020 to January 2021 to allow further time to pay. 

If a coronavirus has affected your business COVID19 pandemic? Then you may claim a grant from the Self-Employment Income Support Scheme

HMRC Coronavirus Helpline
Telephone: 0800 015 9559

Opening Times:
Monday to Friday, 8 am to 8 pm
Saturday, 8 am to 4 pm

Avoiding the 5% penalty during the COVID19 pandemic?

The HMRC has introduced, for self-assessment taxpayers, that they will not be charged the 5% late payment penalty. However, they are required to either pay their tax due or arrange a ‘time to pay arrangement no later than 1‌‌ April 2021.

Payment deadline for the 2020 self-assessment tax balance was 31 January 2021, while interest from 1 February 2021 on tax unpaid. Any remaining tax still unpaid on 28 February, then the HMRC charges a 5% penalty on tax unpaid.

Preparing to negotiate your HMRC arrangement.

Approaching the HMRC to apply for a Time to Pay arrangement requires experience, so the HMRC remains assured you have a reasonable proposal and have sufficient means to discharge your liabilities, not only your tax, but also other debts. Preparation is the key to arranging a Time to Pay with the HMRC.

Ensure your argument convinces HMRC why you remain unable to pay your tax liability on time, and why you can now pay them with an arrangement.

HMRC require evidence of your current expenses, along with your projected income, and importantly, your commitment and resolve on you, repay them.

Preparing for your telephone call with HMRC will help your case. Ensure you answer questions quickly and honestly, helping expedite the process.

Prepare for the following questions: 

  • The reference numbers include your 10-digit UTR;
  • Why you can’t pay;
  • The total tax you can’t pay;
  • How you propose to repay, when, how much;
  • Attempts to borrow money to repay HMRC;
  • Details of your bank accounts.

You may be questioned about your income and expenditure, any unencumbered assets, together with details of sales and any cash flow forecasts.

Ensure you prepare during the call for the interviewer to advise you of your rights and penalties you may face if you fail the arrangement. It is then that the HMRC will then advise you of their decision on the provided information.

To contact the HMRC Payment Support Service (PSS) on 0300 200 3835.

How much should I offer to pay?

The aim of a TTP arrangement is to pay your tax liabilities. Therefore, it’s essential to remain not pressured into agreeing with a monthly amount you won’t pay.

HMRC does not want to enter an arrangement if they have no faith in your plan’s integrity and honesty to repay them. Therefore, act honestly and not vague. 

So consider your position and what you can pay. For further assistance, please contact the HBG Advisory for help and guidance.

How HMRC treat assets when considering a time to pay arrangement

HMRC will wish to know if you own a second home or other assets, including shares or savings.

Having assets that the HMRC and you agree may be realised. Then the HMRC will request you realise them, reducing your debt for the time to pay or paying off your TAX debt.

However, the HMRC will not request you sell your family residence, though they may place a charge on it securing the tax amount owed if a TTP fails to happen.

Pension funds will not be touched to pay your tax debt. However, should you be in receipt of a pension, then this will be accounted for in your income.

What to do if you fail to achieve an agreement?

Suppose no agreement can be agreed. It may be HMRC surmise you remain able to pay the tax due. Therefore, requiring you to make payment immediately. So seek advice to explore options that may assist your case by speaking with HBG Advisory.

Remember, if you and the HMRC cannot reach an agreement or choose to ignore the debt, HMRC will take enforcement action. Therefore, seek help from insolvency practitioners to resolve your next steps and safeguard you. 

Reasons for being declined a Time To Pay.

Your application for a Time to Pay Agreement hinges on your former, if any, payment history and how you then handled your tax affairs. Therefore, HMRC will not consider you for a TTP arrangement if you have:  

  • Late History of overdue or incorrect tax returns;
  • Directors’ accounts overdrawn;
  • Financial information incomplete;
  • Previous arrangements failed;
  • Any previous TTP arrangement does not exclude you, though it will raise HMRC concerns why again

Consequences if I fail to make a payment?

Normally, the HMRC’s amenability ceases if you fail to maintain your negotiated payment plan. HMRC normally cancels the arrangement, and you then risk additional penalties.

Eventually, this could lead to legal action. Therefore, it’s essential to seek help from HBG Advisory as soon as possible.

If you have another new debt to HMRC

HMRC requires future new tax debt paid in full, as and when payable. If unable to pay, then contact HMRC as soon as you are aware..

When already paying monthly payments into a TTP, then the HMRC allows an amendment to include this new debt. However, before carrying this out, ensure you contact the HMRC, who will wish to review your expenditure and income, along with your other liabilities and assets.

Which other options are therefore available?

Failing to agree a Time to Pay arrangement with HMRC, however, does not mean the end. Options however, remain available, helping you to move forward while turning around your situation.

An Individual Voluntary Arrangement (IVA)

Individual Voluntary Arrangement(IVA) is a deal between a sole insolvent trader and its creditors. It is a formal procedure established initially as an alternative to bankruptcy. An individual with assets is often considered the most suitable option because it offers protection over those assets. 

IVA is a legally binding contract allowing individuals to repay part or all their debts by profits earned in the future, defined by a set period. Typically, covering a period of five to seven years. An IVA allows you only to repay money you can afford while writing off the remaining debt at the end of the IVA period. 

HMRC accept IVAs, though guidelines exist for acceptance. Therefore, seek the advice of an insolvency practitioner who will assist you with your preparation of the proposal for consideration by the HMRC.

Considering Debt consolidation

A debt consolidation option is using a fresh loan for repaying debts already owed but unpaid. Consolidating your debts is simple and cheaper if the interest is charged on other loans.

Although it could end up making the situation worse, therefore, examine this option strategically.

Debt management plan

A debt management assists you in resolving cash-flow issues, allowing you further money so you may pay HMRC.

From managing cash forecasts to predicting costs and losses, you could then solve cash-flow problems in the short term by putting a plan in place.

However, adopting a simple plan could help preserve long-term proposals. Whether by then negotiating with creditors or seeking further funding. 

If struggling to prepare a plan, seek assistance from a licensed insolvency practitioner who will consider all aspects of your business, enabling a plan to be agreed upon while helping you lower costs.

The IP will confirm your creditors and the amount owed, placing them in order or priority and no-priority, allowing you to plan and save money.

How does a debt relief order help?

A debt relief order is a cost-effective alternative to bankruptcy, suitable for people living in England or Wales with assets of less than £1000 and minimal debt from £20,000.

If a sole trader, struggling financially. A debt-relief order then freezes repayments and interest up to twelve months. After that period, debts remain paid off, which could give you the additional breathing space to pay HMRC.

I receive an HMRC letter giving notice of a threat to wind my company up. What are my next steps?

Receiving a Seven-Day HMRC Warning Letter notifying intent to commence a ‘Winding Up Petition.’

The HMRC will send you a seven-day warning letter chasing any late payment of tax. The letter remains designed to leverage you to negotiate payment. It is important to note the contents as failing to pay within seven days of the letter date. Then the HMRC solicitors will commence via the HIGH Court to wind your limited company up and proceed to a compulsory liquidation with the official receiver. However, remember the letter is a ‘letter before action’. It will also enclose details of your liabilities, including fines and accruing interest.

What steps then will the HMRC commence for nonpayment?

HMRC may:

  1. Issue a County Court Summons;
  2. Instruct a Revenue Field officer or a Bailiff once a Notice of Enforcement sent;
  3. Commence issued a winding-up petition.

Therefore, act swiftly. The HMRC must advertise the petition in the London Gazette within seven business days of being issued. Resulting normally in the freezing of the limited company’s bank accounts by your bank and other creditors aiding the petition, making it difficult for the company to trade, as more creditors require paying.

What action is required if I can’t pay?

Upon receipt of the HMRC, then act swiftly. Do not ignore the letter. Automatic computer-generated action by the HMRC will commence if you fail to respond within seven days. Paying the debt will stop further action. Though if you are not able to pay, then you need to seek a licensed practitioner. One of the options available to help your company continue trading is a ‘Company Voluntary Arrangement (CVA)‘. This allows a limited company insolvent to agree repayment of its debt with creditors without closure. Suppose the IP advises to propose a CVA to the creditors of the company. Then a moratorium protects the company from creditors. No legal action may take place while this is in place. Therefore, the viable company can propose to repay creditors in an affordable manner, paying off its debts up to an agreed date while trading on paying from its profits. Usually, the CVA lasts 60 months and pays either a percentage of the debt back or in full. A CVA remains legally binding on all parties and is supervised by the IP appointed.

A CVA’s advantage is the company directors remain in control of the limited company’s management, preventing HMRC from commencing legal action.

So how does the HMRC collect tax arrears?

The HMRC has a set automated procedure for collecting outstanding arrears if you fail to communicate and agree on a TTP. They start with:

  1. Issuing a County Court Summons;
  2. Achieving a County Court Judgement (CCJ);
  3. Instruct the bailiff to act or warrant;
  4. Issue notice of enforcement;
  5. Apply for a Winding up petition.

How HBG Advisory can help and support

If self-employed and unable to pay your tax liabilities, it’s essential to contact the HMRC as soon as feasible. Don’t ignore the situation; delaying matters worsen the situation.

Remember, you do not have to face financial difficulties alone. For any query, guidance in dealing with outstanding payments or help negotiate a Time to Pay with HMRC, HBG Advisory are here to help.

Our dedicated team assists sole traders while offering procedures that help reduce the debt you have, or offering additional breathing space to sort the matter out. Therefore, please contact HBG Advisory today for robust help and advice.

Meet the team at HBG Advisory.

For further reading on HMRC debt, please read’ clear HMRC debt‘ and ‘Can’t pay VAT. What happens next‘.

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