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Companies and businesses facing financial difficulties often end up delaying payments to HMRC and using these funds to provide emergency cash flow needed for their businesses to survive.  While HMRC will never agree to write off any payments which are outstanding they will agree in some circumstances to repayment arrangements over a period of time.

For business which are experiencing temporary difficulties an HMRC approved Time to Pay Arrangement can be an effective way of managing cash flow difficulties.

HMRC Time to Pay Arrangements are only intended to assist viable businesses. Arrangements are tailored to the ability of the customer to pay..

How much time will HMRC allow for payment?

Time to pay Arrangement are typically for a few months although they can be longer. Payment Arrangements can last over a year but HMRC will only agree to such arrangements in exceptional cases. Most arrangements involve regular monthly payments being made but in exceptional cases may involve a short period of deferral.

HMRC's Requirements

For HMRC to be persuaded to allow a customer time to pay an outstanding debt the customer must comply with HMRC'S requirements.   HMRC has published details of the principles it applies when considering any application for time to pay.  These principles are:
  • Objective criteria are applied in each case.
  • Payment arrangements are entered into on a case-by-case basis.
  • Deferred payment is only agreed where HMRC is satisfied that the customer cannot pay their liability on the actual due date(s).
  • The customer must offer HMRC the best payment proposals that they can realistically afford. If their ability to pay improves during payment period they are expected to contact HMRC and and increase their payments or clear the debt in full.
  • A time to pay arrangement is only agreed where HMRC believes that the customer will have the means to pay the taxes included in the arrangement and any other taxes outside the arrangement which become due during the time to pay arrangement period.
  • The time to pay arrangement period must be as short as possible.
  • The same principles are applied by HMRC to all taxpayers, although the detail of processes can be tailored to reflect the risk/return associated with different liabilities. As a rule, the larger the liability the greater the risk and the greater the need for more information to be provided to HMRC.

It is important to note that HMRC will never reduce the amount of tax due as part of a Time to Pay arrangement.

If repayments of tax become due during the payment period HMRC will offset these against the debt

Interest will continue to be charged by HMRC on all outstanding payments included in any Time to Pay arrangements.

Honesty is the Best Policy!

HMRC is bound by Time to Pay agreements that it enters into but may withdraw  from the agreements if:
  • new facts come to light that don’t support the agreement
  • the customer has misled HMRC or been untruthful
  • the customer defaults on the arrangement or does not satisfy the conditions of the agreement
  • any other reason comes to light where it becomes apparent that tax is at risk.
Time to Pay Arrangements are not suitable for companies or businesses facing serious financial difficulties where it is unlikely the debts owed to creditors can ever be paid in full.  To find out if a Time to Pay Arrangement may be appropriate for your business please contact a member of our experienced team and we will be happy to assist you. We will also advise you on how best to present your case to HMRC if we recommend that a Time to Pay Arrangement could resolve your difficulties.

If a Time to Pay Arrangement is not likely to resolve your difficulties Bennett Jones Insolvency will help you to consider all other alternative solutions and provide you with comprehensive information an d guidance.  At a time when your business is likely to be facing the need to make critical decisions regarding its future and when you are under pressure as directors or business owners Bennett Jones can provide the technical expertise and business support you need to ensure the best solution  for you is chosen and implemented.

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