HMRC’s Time to Pay – how does it work?

You might not have heard of the Time To Pay (TTP) initiative or fully understand what it means but it’s a useful tool for business owners to use.

If a company is in financial difficulties and can’t pay it’s VAT, PAYE or Corporation Taxes on time then TTP could be the ideal solution. 

What is Time To Pay?


Time To Pay is basically an installment plan that gives a business more time to settle their tax obligations and bring any arrears up to date. 


HMRC won’t reduce or write off any tax owed but will allow companies spread their repayments over a longer period and get some vital breathing space. HMRC will continue to charge interest on any debt but as long as any TTP agreement is adhered to, they will stop any penalties. .

Why consider a Time to Pay Arrangement?


Maybe you’ve got cash flow problems? Perhaps business hasn’t been great for the past few months? 


Either way, being late with tax payments is never a good idea. It sends a red flag to HMRC that your company is potentially insolvent. 


Their automated systems spot late payers early, and in some cases even anticipates them, and begins a process that could end in hefty penalties, seized assets, winding up proceedings and even bankruptcy.


What does HMRC consider a ‘good’ Time to Pay Arrangment?


Along with repayment. HMRC wants continuing honest communications. 


They want to understand the reason for any arrears and how the business is able to move forward profitably, not only repaying any arrears but being able to service ongoing tax liabilities. 


Something to bear in mind is that although they might not know you personally, they will be intimately acquainted with your previous tax filings and payment history and this will be taken into account when assessing any TTP requests.


They will look at the chances of any TTP plan being successful based on this data and other details you supply. 


We always suggest getting a qualified third party such as your accountant or a professional advisory firm such as ourselves to present your case too. 


It shows that you are taking the issue seriously and it will also identify any potential issues or errors in the figures that can be caught and fixed before being presented to HMRC. 


If successful, the arrangement will be quickly agreed and you’ll be told your rights and what any penalties might be if you don’t keep to the agreed arrangement or if you’ve supplied any false information.   


How much time will I get?


HMRC will award anywhere between one and 24 months to clear any arrears but each situation is different. All arrangements are discretionary and wholly dependent on your circumstances. 


An important note


HMRC’s Time To Pay scheme is designed for businesses with real financial problems, but also those same businesses need to be able to keep up with any agreed arrangements. 


If you’re unable to make the regular payments or you miss any future tax deadlines and fall into arrears again then HMRC will likely react more quickly and severely. TTP is seen as a one-off chance to catch up and most certainly won’t be repeated. 


TTP only refers to tax arrears. If you have other debts then you’ll need to consider other solutions to tackle them. 


Get in touch with us and we can advise what solutions such as CVAs, liquidation or administration might be the most appropriate for you.