HMRC Time to Pay Arrangement: What Happens if You Can’t Pay Your Tax Bill?

If your company is having problems meeting its tax bill, you may be able to agree an arrangement with HMRC that enables you to pay your tax in instalments over a longer period of time. This is called a Time to Pay (TTP) arrangement.

Time to Pay arrangements are suitable for companies that are having short-term cashflow difficulties. If you are having wider, ongoing HMRC tax problems then this will not be the best solution to solve them.

Time to Pay arrangements signal an agreement between HMRC and the taxpayer that tax can be paid over an agreed period rather than in a lump sum. All taxes can be subject to Time to Pay arrangements but it’s most often used for Corporation Tax, VAT and PAYE in relation to companies.

When to Approach HMRC About a Time to Pay Arrangement

The best time to approach HMRC if you are having difficulties with your tax bill is before the tax bill is due. It is possible to agree Time to Pay arrangements once the debt is overdue but it’s much better to take a proactive approach. HMRC are much more likely to consider your application if you contact them before the debt is overdue. This also has the benefits of avoiding penalties that would be incurred were the tax to become overdue.

What HMRC Consider When Assessing a Time to Pay Application

HMRC’s main concern is whether a company is asking for a Time to Pay arrangement because the company can’t pay or because it won’t. If it can pay the tax bill, they will expect it to do so on time and in full. It’s only in situations where it genuinely can’t pay that they will consider a Time to Pay arrangement.

If they consider that the company honestly can’t pay the debt, they will also look at its payment history, the sector it operates in and the likelihood of its ability to be able to pay future tax liabilities when making their decision.

How to Apply

HMRC strongly prefer that applications are made over the phone as they believe it is the most efficient way for them to gather the information required for their decision. Their telephone number is 0300 200 3835. Alternatively, we are experienced in negotiating arrangements with HMRC. Contact us for initial consultation, either by calling us on 020 8444 2000 or using our Contact Us form.

You should prepare for the phone call – having the company’s cash flow figures and forecasts for the coming months will help you make a good case for the agreement. It will also help you to ensure that you don’t commit to payments that will be too onerous for the company to meet in the agreed time frame.

What the Agreement Covers

The contents of the Time to Pay agreement are completely dependent on the particular circumstances but as a general guide it will contain:

  • The period, taxes and amounts the Time to Pay arrangement was agreed for.
  • The total debt included in the arrangement.
  • The agreed instalments: their amounts and the dates on which they will be paid.

HMRC prefers to have debts repaid quickly, so the majority of agreements are for periods of less than a year, with the largest number for periods of under six months. It is possible to negotiate longer repayment periods but you will need to have a strong case for them to agree to this.

Conditions of the Agreement

If HMRC do agree to a Time to Pay arrangement, you should be aware that it will be subject to a number of conditions. You must adhere to these conditions otherwise they can (and do) cancel the arrangement and demand immediate payment of amounts still outstanding. If this demand is not satisfied, they can bring legal action to recover the debt and charge penalties as appropriate.

  • Payment of the agreed instalments on time and in full.
  • Full disclosure of HMRC debts. You must tell HMRC about all the company’s debts to them when you are seeking the Time To Pay agreement.
  • HMRC expect you to have been honest about whether the company actually needs more time to pay and about the rate at which the debt can be repaid.
  • You will report any changes to the company’s financial situation that mean the debt can be repaid more quickly to HMRC.
  • Any repayments due from HMRC for overpaid tax should be set-off against the outstanding debt.
  • Future compliance. Any future returns must be filed on time and all future tax liabilities paid in full and on time.

It is very important that you ensure the agreed instalments are paid on time and in full – this means being sure when you are negotiating the agreement that the amounts agreed are actually affordable. Defaulting on the payments will put the company in a very serious situation and HMRC will pursue enforcement action.

The condition that companies also often find difficult is the payment of future tax liabilities in full and on time. In situations where the Time to Pay arrangement also covers future due dates, HMRC may consider including those future liabilities in the arrangements. If they dont, you must be comfortable that you will be able to meet those future liabilities as their late payment could lead to the cancellation of the agreement.

It may be that HMRC will agree a further Time to Pay agreement when further liabilities become due but they will scrutinise the company very carefully before they do so and this should not be relied on as a course of action.

Next Steps

If you are unsure about what course of action to take in relation to a Time to Pay agreement, you can contact us for a no obligation initial consultation on 020 8444 2000 or using the Contact Us form.

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