Understanding more about Time to Pay (TTP) and HMRC

Understanding more about TTP

In the recent spring Budget, the Chancellor of the Exchequer Rishi Sunak said Britain will rise to the challenge of COVID-19, adding that: “HMRC will scale up the Time To Pay service to allow businesses and self-employed to defer tax payments.”

Known as a Time to Pay (TTP) arrangement, it is designed to help businesses that are fundamentally viable but experiencing temporary cash flow problems.

If HMRC believes that your company is nearing insolvency, they may act quickly to recover their money, so we must stress that a Time to Pay arrangement is only for those businesses that are fundamentally profitable.

Our advice is to always be proactive with HMRC – don’t wait to be contacted by them because your tax payment was late.  The existence of Time to Pay arrangements indicates an understanding by HMRC that problems will arise, and a willingness to help under certain circumstances, but the responsibility remains with you to initiate contact.

A TTP arrangement is a method of spreading your tax payments over a longer period of time than would otherwise be available.  It is used for arrears of corporation tax, VAT and PAYE, but can also be used if you are anticipating problems with an upcoming payment or payments, and it may help you to avoid a late payment penalty.

HMRC will want to satisfy themselves that you are not trying to deliberately avoid meeting your tax liabilities.  When weighing up the risk of allowing extra time to pay, they also consider the industry in which you operate, and its previous history of repayment as a whole.

If a TTP arrangement is agreed, it is imperative that you meet these payments in full and on time, otherwise your problems could significantly increase.  HMRC could immediately cancel the arrangement if you default, calling in the total debt and applying a range of penalties.

 

If a TTP is agreed, interest will probably be charged on the amount to be paid, but penalties may be lifted if you have made contact with HMRC quickly, and acted responsibly to redress your situation.

Applying for a Time to Pay arrangement

Once you have put together a strong case in favour of being granted extra time to pay, you need to phone HMRC, or seek the help of a professional accountant who will negotiate on your behalf.

But what constitutes a ‘strong’ case?  This means presenting a realistic proposal in terms of what you can afford to pay, backed up by evidence in the form of:

(a) Sales and cash flow forecasts for the following six months or more

(b) A plan of how you will cut costs to free up extra cash

(c) Generally conveying your determination to ensure repayments are met.

It is worth remembering that HMRC will want the TTP arrangement to be over the shortest time, with the highest repayments possible, in order to recoup their money quickly.  You must be careful, however, to offer only what you can afford, and be certain that your company can meet its obligations as set out in the plan before it is agreed.

Dealing with HMRC can be problematic unless you understand how they operate, which is why many of our clients ask us to discuss and negotiate on their behalf.

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