Time to Pay support guide
If you can’t afford to pay your tax in full and on time the biggest mistake you can make is to ignore the problem and not engage with the tax authorities. Since the pandemic began HMRC has taken a supportive approach by offering business and individual taxpayers time to pay if they cannot afford to pay their tax debts – including payments due on 31 January 2022.
An agreement reached with HMRC for this is called a Time to Pay Agreement (TTPA) – many thousands of taxpayers have used these in the last two years, so if you need support too, it is best to ask for it before outstanding bills start to mount up.
How tax payment support has evolved
The latest announcement from HMRC confirms that where individuals are struggling to pay their Self-Assessment tax due on 31 January 2022 it will not invoke the usual 5% surcharge provided the tax is paid by 1 April or a TTPA is put in place by that date.
This reflects the very supporting stance that HMRC has taken since the first COVID-19 lockdown in March 2020 when it agreed typically 3-month deferrals of PAYE, NIC, corporation tax and certain other indirect taxes with minimal information from taxpayers in support of these requests. Specific deferral options were also announced to support individuals and businesses who were struggling to pay their tax liabilities due to financial distress. Further to this support, HMRC put its debt collection activities on hold.
Throughout the pandemic, HMRC announced further extensions of TTPAs were possible and whilst they began to request more information to evidence the need for such arrangements, overall HMRC remained supportive to those who required assistance.
During 2020, HMRC introduced a “self-serve” facility so taxpayers could set up a TTPA online through their self-assessment tax account. You can set up a TTPA this way provided your tax returns are up to date, the debt is less than £30,000 and you do it within 60 days of the payment deadline. This allows you to spread the tax payments over 12 months and is still available to cover tax payments due on 31 January 2022. If you are not eligible for this facility you will need to call an HMRC helpline (see below).
In May 2021, the Government also launched its “Breathing space” scheme which gives individuals facing financial difficulties 60 days to get their finances ‘back on track’. During this period, people can access legal protections from all their creditors (including HMRC). For taxes this means than most interest and penalty charges frozen, and enforcement action is halted during the 60-day period.
As part of the Omicron variant support announcements, the Government has said that hospitality and leisure businesses can apply for a “short delay” in instalment payments previously agreed.
On 30 June 2021, HMRC published a policy paper announcing the recommencement of its debt collection activities as the UK emerges from the pandemic. Specifically, from the end of September 2021 HMRC may start the process of collecting the debt using enforcement powers where taxpayers are unwilling to discuss a payment plan or where a taxpayer ignores communications from HMRC. These enforcement powers include, for example, include taking control of goods, summary warrants and court action.
It does appear from experience that as a precursor to enforcement proceedings recommencing, HMRC’s Field Force agents are visiting premises of businesses who have tax debts owing as a result of the COVID-19 pandemic. These visits are unannounced and largely revolve around the Field Force agents seeking to understand how the approached business is operating and confirm that it remains financially viable. Whilst businesses are under no obligation to speak to the Field Force agents at the first visit it is probable that follow up visits / meetings will be instigated if significant debts remain outstanding. HMRC also uses third parties to do desk based follow up e.g. calling taxpayers who owe money. HMRC is also restarting other activities such as instigating insolvency proceedings.
Given the recommencement of HMRC’s debt collection activities, it is important that taxpayers settle any outstanding liabilities if they are able to do so, or engage with HMRC with a view to agreeing a TTPA for liabilities not already subject to a specific deferral option. Listed below is the typical information HMRC asks for before it will agree a TTPA.
The Self-Assessment Payment Helpline number is 0300 200 3822. To set up an instalment agreement for other taxes, use the contact details on the payslip or call the Payment Support Service on 0300 200 3835 (opening hours are Monday to Friday 8am to 6pm). The helpline will not be available on Bank Holidays.
For companies and groups with a Customer Compliance Manager, any TTP requests should in the first instance be directed to them.
Best practice for agreeing time to pay with HMRC
Below are some key practical points to bear in mind if you request a Time to Pay Arrangement (TTPA) with HMRC.
- Seek TTPA with HMRC in advance of payment deadlines
- Unless you are using the self-serve facility, contact HMRC by phone in the first instance
- Explain the financial hardship and impact of COVID-19 on finances
- Know your desired time frame for deferral and why affordable
- Demonstrate you are managing costs
- Explain other debt financing and borrowings
- Prepare a cash flow forecast
- Show management accounts and cash reserves
- Explain the commercial rationale
- Prepare monthly income and expense statements
- Prepare a personal statement of assets and liabilities
- Make sure tax returns and accounts filed up to date
- Check if forward interest will be charged
- Check if any late payment penalties or surcharges will apply
- What about future tax liabilities?
- Remember that TTPAs are a deferral of payments. Tax liabilities are not written off.
- Up-front payments or periodic instalments by direct debit may be requested
- More than 12 months requires a higher level of evidence
- It may be contingent on future income or the sale of an asset
- Stick to the new deadlines under the TTPA. Set up a direct debit to HMRC.
- Renegotiation may be needed, especially given the unknown timeframe for the COVID-19 impact.
Specific points for consideration
In addition to the general key practical points above, the following should be noted when evaluating TTPA requirements:
- R&D tax credits – where tax is deferred as part of a TTPA or informal arrangement, HMRC will follow the legislation and existing policy and offset any R&D tax credits against any liabilities covered by the TTPA or informal arrangement.
HMRC should be made aware of such expected credits at the outset of TTPA discussions or notified of any subsequent credits which were not expected when a TTPA was agreed. Full and accurate disclosure of the financial position should be made to HMRC when discussing TTPA requirements.
- Coronavirus Job Retention Scheme (CRJS) - Employers who received CJRS grants to cover employment costs were expected by HMRC to pay the PAYE and NIC liabilities in relation to these by the normal due date – informal deferrals or TTPAs were not permitted in respect of these PAYE/NIC liabilities if employers received the CJRS claim monies.
Any PAYE/NICs liabilities that were not covered by the CJRS grant could potentially be postponed and form part of a formal TTPA.
Head of Tax Dispute Resolution
BDO London - Baker Street
BDO London - Baker Street