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Time to pay arrangements

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What is a Time To Pay Arrangement?

If a business starts to experience cash flow problems, one of the first payments to suffer is likely to be VAT and PAYE that are due to HMRC. In fact, Her Majesty’s Revenue and Customs is one of the most common business creditors; most insolvent companies are in some kind of debt to HMRC. Thanks to the electronic systems now in place, it’s easy for the taxman to spot and chase late payers.

If you are aware that your business has fallen behind with payments to HMRC, depending on your company’s financial circumstances, it can be possible to arrange a payment plan to settle your arrears and bring your account up to date to get back on track. This extra time is known as a Time To Pay Arrangement. Self-employed sole traders can also apply for a Time To Pay Arrangement.

How long do Time To Pay Arrangements last?

Typically you will be required to pay the amount owed over 12 months. However, depending on your circumstances, the amount owed and how much you can pay back each month, it may be possible to negotiate a longer repayment period.

If you do find yourself having trouble paying your tax bill, or you suspect that you may encounter trouble in the future, we recommend that you tackle the situation as soon as possible to ensure you are in control, complying with your duties as a director and understand any consequences of not addressing the underlying problem whilst continuing to trade and incur further debt. ICS can help with that; contact our specialist team today who can provide appropriate advice to help you understand your options and help negotiate the best outcome for you with HMRC.

There are also a number of typical conditions that must be met before HMRC will consider a request for a TTP:

  • All tax returns must be completed and up-to-date
  • HMRC must be completely satisfied that you cannot pay your tax
  • HMRC must be confident that all future tax payments will be paid in full and on time
  • Any outstanding taxes must be paid in full and as quickly as possible
  • They must be confident that you have explored, but have been unable to find, alternative funding

If you are looking to make a Time To Pay Arrangement with HMRC, you will likely be asked to produce a repayment offer and make your case in writing. You will also be asked to produce copies of your financial information and put forward a case explaining why you are unable to pay your bills and how much you can realistically afford to pay each month. Although it may be tempting to overstate how much you can afford, it’s important to be honest. Offering to pay more or less than you are able could result in your repayment request being rejected.

There are a number of factors that HMRC will look at when considering your case:

  • The viability of your business in the long term
  • The likelihood of your repayment proposal being successful
  • Whether there are any suitable alternatives

There is no set criteria that you have to meet before your proposal will be accepted. However it is important that you are able to present a convincing argument on why you cannot pay and how you are going to get the money to them over a set period of time. You must be able to produce evidence of your projected income for 12 months (or the agreed upon repayment period) as well as your expenses. They will also want to hear that you are committed and determined to paying them back in full.

Find out more about Time To Pay Arrangements

If you think that you will face problems paying your tax bills, it’s important to tackle the situation sooner rather than later. ICS can guide you in the right direction. Our experts can provide advice and guidance to help establish a solution that will solve the problem and allow you to continue trading. Visit our contact us page and fill in the form to get in touch or give our team a call on 0800 731 2466.

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