Reviewed 12th February 2024
If you’re struggling with company tax debts, you can make a Time to Pay arrangement with HMRC to repay what you owe over a typical period of six months. It gives you more time to pay your tax bill without having to worry about pressure or legal action from HMRC.
A Time to Pay (TTP) arrangement allows you to repay all your company tax arrears - VAT, Corporation Tax and PAYE - in monthly instalments over a period of up to 12 months. You can also include any penalties or surcharges you have received in the arrangement.
Further late payment penalties or surcharges will not usually be added to your tax bill once you have agreed to a Time to Pay arrangement. However, interest will continue to accrue and be included in your monthly repayments.
If you’re facing a cash flow shortfall and are concerned about your ability to pay taxes such as VAT, PAYE and Corporation Tax, the best time to contact HMRC is before the tax is due. That will give you the best chance of making a TTP arrangement and reduce the likelihood that penalties and surcharges will be added to your bill.
You can contact HMRC to negotiate a Time to Pay arrangement yourself, although professional support can be beneficial. HMRC will ask you questions to understand your financial position and determine whether to give you more time to pay. It may ask:
After your initial interview, HMRC will usually ask you to produce a repayment proposal in writing and provide evidence of your company’s cash flow position. You should be honest about the amount you can realistically afford, as HMRC will not offer you a repayment plan if it doesn’t think you can stick to it. Bear in mind that as well as the monthly instalments, you will also be expected to pay your ongoing tax bills when they become due.
HMRC will want to see a repayment proposal that you can afford but also clears the debt as quickly as possible. You may be able to shorten or lengthen the arrangement once it has been agreed if the company’s financial position changes.
HMRC will consider several factors when deciding whether to give you more time to pay. Firstly, it will look at your company’s financial viability. If your business is experiencing a temporary cash-flow problem and you’ve done everything you can to keep up with your tax affairs, it will usually try to help.
It will also look at how well you have conducted your tax affairs in the past. It will help if you have filed returns and paid your bills on time, but if your company has a less-than-perfect compliance history it won’t necessarily rule you out.
Once it’s in place, HMRC can only cancel a Time to Pay arrangement under exceptional circumstances. However, if you do not stick to the agreement or fail to make ongoing tax payments when they’re due, all that changes. HMRC can then cancel the arrangement and add on a penalty as well.
This is a situation you want to avoid as it can escalate quickly. The worst-case scenario is that HMRC issues you with a Winding Up Petition to force your company into liquidation.
If you’re struggling to pay a tax bill or think you will in the future, contact HMRC at your earliest opportunity or get in touch with our team for specialist advice. Our business debt advisors have vast experience dealing with HMRC and can negotiate a Time to Pay arrangement on your behalf.
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