Time to Pay support guide
Business and individual taxpayers can seek time to pay from HMRC if they cannot afford to pay their tax debts in full and on time. An agreement reached with HMRC for this is called a Time to Pay Agreement (TTPA).
On the introduction of the COVID-19 lockdown in March 2020 HMRC was very supportive and 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.
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 pre-curser to enforcement proceedings recommencing, HMRC’s Field Force agents are randomly 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 probably that follow up visits / meetings will be instigated in the autumn if significant debts remain outstanding.
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 tax helpline number is 0800 024 1222 - and is an addition to other HMRC phone contact numbers including a specialist SDLT debt management helpline on 0300 200 3844. Opening hours are Monday to Friday 8am to 4pm. The helpline will not be available on Bank Holidays.
Alternatively, taxpayers with Self-Assessment tax debts of up to £30,000 may be able to apply for a TTPA online (through your Government Gateway account).
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
- 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 are expected by HMRC to pay the PAYE and NIC liabilities in relation to these by the normal due date – informal deferrals or TTPAs are not permitted in respect of these PAYE/NIC liabilities if employers received the CJRS claim monies. Non-payment for these CJRS related PAYE/NICs liabilities may prevent subsequent CJRS claims.
Any PAYE/NICs liabilities that are not covered by the CJRS grant can potentially be postponed and form part of a formal TTPA.
- Use of other deferral options – a number of specific deferral options were introduced by the government in response to the pandemic to help support taxpayers. This includes, for example, the deferral of the second payment on account under Self-Assessment and VAT deferral under the New Payment Scheme. The suitability of these options can be considered by taxpayers when evaluating TTPA requirements.
Head of Tax Dispute Resolution
BDO London - Baker Street
BDO London - Baker Street