Managing tax liabilities can be one of the toughest challenges for businesses, especially in uncertain trading conditions. If you’re struggling to meet your tax deadlines, a Time to Pay Arrangement with HMRC could give you the breathing space you need to stabilise cash flow and plan ahead. Learn more in our time to pay arrangement guide.
If you’re reading this because your business is finding it difficult to pay its tax bill on time, our insolvency solicitors can help. We’ll advise you on your options, support you through negotiations with HMRC, and help you put a realistic, workable payment plan in place to protect your business and its future.
Contents:
- What is a Time to Pay arrangement with HMRC?
- How do I apply for a Time to Pay arrangement?
- What kind of debts are eligible for Time to Pay arrangements?
- What are the eligibility criteria for a Time to Pay arrangement?
- What happens if you can’t make the agreed Time to Pay payments?
- What can HMRC do if the Time to Pay payments fail?
- Personal Liability Notices
- What can I do if I can’t pay arrears and fall behind in a Time to Pay arrangement?
- How can we help?
What is a Time to Pay arrangement with HMRC?
A Time to Pay arrangement is an agreement which can be reached with HMRC which allows a business an extended time to pay tax arrears. The time agreed and payment amounts will be specified in the agreement, and will depend on the amount owed, and how much a company can pay to clear the arrears as soon as possible. A company’s time to pay arrangement will be based on their specific financial circumstances and there is no standard time to pay arrangement template.
A time to pay arrangement can be very beneficial in giving a business some breathing space when cashflow is tight, and can also have the effect of reducing penalties for late payment, depending on what is agreed, it is only suitable for a business that is experiencing fairly short term cash flow problems. A company that has more serious problems should not enter into a time to pay arrangement but should take more specific advice on their options regarding overall continued trading. At Harper James we have many years’ experience in advising companies in this position, and insolvency solicitors are happy to have a chat if you find yourself looking to negotiate a time to pay arrangement.
Under a time to pay arrangement, taxpayers can set up a payment plan to spread the total amount of their outstanding tax bill.
How do I apply for a Time to Pay arrangement?
Once you have become aware that you may struggle to meet your tax obligations, you should reach out to HMRC and start gathering evidence to support an application for a time to pay arrangement. You need to be able to show that you cannot meet your tax bill in full and on time but that you could make regular payments over an extended period.
You need to present a realistic repayment plan which should be backed up by evidence such as details of income, expenses and liabilities, sales and cash flow forecasts and how you propose to meet the repayments to HMRC, for example by cutting costs in other areas of your business. HMRC will only agree to a time to pay arrangement if it is happy that you are able to and are committed to repaying your taxes on time and in full.
What kind of debts are eligible for Time to Pay arrangements?
Any tax, interest, penalties or surcharges can be included in a time to pay arrangement, but this will be at HMRC’s discretion on a case by case basis. There are a few taxes where there is a right to pay by instalments by law. If you would like further information on this, please contact our insolvency and recovery solicitors.
What are the eligibility criteria for a Time to Pay arrangement?
HMRC does not have set eligibility criteria to apply for a time to pay arrangement but will take into account many different factors when deciding whether to approve an application and will consider each case individually. Factors which will be relevant when assessing an application for a time to pay arrangement will include the following:
- A demonstration of the business’ inability to meet the tax bill in full but the ability to repay in agreed instalments.
- Any previous non-compliance with tax rules such as late filings and any fines issued.
- Any specific industry nuances which may affect your ability to meet repayments.
- Any past time to pay arrangements.
For Self Assessment, PAYE and VAT tax, there is a possibility to set up a payment plan online if certain criteria are met.
What happens if you can’t make the agreed Time to Pay payments?
It goes without saying that it is very important that you agree a realistic time to pay arrangement with HMRC to avoid this happening in the first place, none of us have a crystal ball and in today’s uncertain times, it is hard to predict cashflow and inevitably there will be times when a company will just not be able to meet repayments.
If this happens, it is vital that you get in touch with HMRC as soon as possible, and preferably before you actually breach the payment plan. If it is just a temporary hiccup, HMRC may well adjust the plan to take this into account. You will have to show good reason why the plan is being breached, and be prepared to provide detailed financials to show how this has happened, and a proposal for turning things around in the very near future.
What can HMRC do if the Time to Pay payments fail?
If HMRC are not satisfied that the plan will get back on track quickly, then they may well cancel the time to pay arrangement and demand immediate repayment of all arrears. If that is the case, and the business owes significant arrears, HMRC can come down very hard and may take whatever enforcement action is most appropriate, which can ultimately mean petitioning for the company’s liquidation.
While most creditors have to prove their debt via a court judgement or an unpaid statutory demand before commencing winding up proceedings, HMRC do not have to. They also have preferential creditor status for most corporate taxes now, meaning they jump the queue in any formal insolvency over the majority of other creditors.
Personal Liability Notices
HMRC have specific powers to penalise company officers personally who they believe are involved in a deliberate policy of non-payment of National Insurance Contribution (NIC) debts owed to the Crown, or who are simply neglectful in meeting arrears.
Directors who have taken proper and reasonable steps to ensure that HMRC are not ignored are unlikely to be issued with a Personal Liability Notice, but if HMRC carry out an investigation and find that there was a deliberate policy of failure to pay NIC then they may request outstanding amounts directly from company officers who were involved in this policy. Failure to pay could lead to directors being targeted for bankruptcy themselves.
For this reason, if your company is having problems with cashflow, we strongly advise not to ignore HMRC, but to seek legal advice from an experienced insolvency solicitor who can help you reach an agreement for your arrears.
What can I do if I can’t pay arrears and fall behind in a Time to Pay arrangement?
If dealt with early enough, there are options for companies in this position. If a new time to pay arrangement can’t be reached, then a viable business that is just experiencing some temporary problems, may be able to obtain an additional capital injection or loan funding to pay arrears.
Another alternative is to come to an arrangement with all of the company’s creditors. If creditors can agree to proposals under a Company Voluntary Arrangement (CVA), including HMRC, then they will all be bound by such agreement as long as the terms are complied with. This can avoid winding up and pressing creditor threats, and allow a company to get back on track. Again, it is vital any agreement is realistic. If you want more information on this process then contact one of our Insolvency solicitors to discuss this further.
If there really is no viable option for the company going forward, then directors should take advice on their formal options from an insolvency lawyer or insolvency practitioner as early as possible. This will protect the company from further damage, and can protect the directors personally from any liability they may have when trading what is essentially an insolvent company.
How can we help?
For more information on any of the above, or if your company is experiencing any sort of unwelcome creditor pressure, contact one of our Recovery and Insolvency solicitors today to consider the options that are available for your company, and how to protect the directors. Our team has many years’ experience advising companies in all circumstances and are happy to help.