If you find yourself in a situation where you cannot afford to pay your business’s taxes on time, then it is possible to come to an agreement with the government that offers you some leeway to pay off said debts. This is called HMRC Time To Pay.
What Is Time To Pay?
The HMRC Time To Pay arrangement (TTP) is an agreement a company can make with HMRC that allows for more time to be taken to pay their tax burdens, usually in a 6-to-12-month time scale.
Time To Pay arrangements can be made with HMRC and their debt collectors, provided that:
- You have no outstanding debt agreements with them already.
- Your tax returns are up to date.
- The debt is less than £30,000.
- It is within 60 days of the tax payment deadline.
Each arrangement will be specific to the company in question and can be amended over time. For example, if your financial position improves then the length of the agreement can be reduced.
HMRC do charge interest on Time To Pay arrangements. Interest will accrue from the date the debt is due to the end of the arrangement.
How To Apply
TTP agreements have to be proposed to HMRC (or applied for on their website). Getting the proposal right is extremely important as TTP is not a given right and you can be denied more time if this process goes poorly. You will have to explain how not only will you cover the tax burden you have not been able to pay yet, but also how you will pay for the upcoming tax liabilities that you face in the next year.
Your application is also more likely to be successful if there’s an unforeseen circumstance to the payments being late (e.g. illness).
Key Things To Remember
- Extensions and pauses are possible with HMRC Time To Pay arrangements, especially in cases when you need delays to sell off company assets, or if you fall ill or become unemployed.
- Unless exceptional circumstances arise, HMRC cannot cancel the TTP agreement.
- The agreement will only be accepted if HMRC believes you cannot pay your taxes on time, so this means you cannot apply for a TTP agreement if you just want an extension on paying your taxes.
What if HMRC Decline the TTP Proposal?
There are several reasons why HMRC may decline your TTP proposal, those being:
- HMRC do not believe you will be able to pay off your debt.
- They believe your proposed monthly instalments are too ambitious or not enough.
- You/your business has a track record of not paying their taxes on time.
If your HMRC Time To Pay arrangement is declined then you will have to look for alternative options to cover your costs. In this situation, it may be suitable to enter into a formal insolvency process. Company administration is one option, as this will give you breathing room from creditor pressure and possible winding-up notices during which you can create a suitable business rescue plan.
Alternatively, if you cannot find a suitable way to pay or restructure your debts, you may wish or have to enter into liquidation. It is always preferable to enter into liquidation on a voluntary basis via a creditors voluntary liquidation (CVL) rather than be forced into compulsory liquidation through a winding-up petition, so make sure that you speak to a qualified professional at the first available opportunity if you are concerned about paying your debts.
The team of licensed insolvency practitioners here at My Liquidation can help you understand your options if you are struggling to keep up with your tax payments. We can help you explore a Time To Pay arrangement alongside other alternatives so that you can proceed with the best possible route for your business. Get in touch today to receive clear and transparent advice.
