HMRC Time to Pay Arrangements and Company Tax Debt Help

What is an HMRC Time to Pay arrangement?

A Time to Pay arrangement (TTP) is a repayment plan agreed with HM Revenue and Customs that lets a business pay tax arrears it owes in monthly instalments instead of one lump sum by the due date. It can cover most business taxes, including VAT, PAYE and National Insurance, corporation tax and Self Assessment.

It is agreed where the business can realistically afford each instalment and will be able to pay future tax bills on time. Arrangements commonly run for between six and twelve months, and longer plans are sometimes agreed where the figures support them. Interest will continue to accrue on the outstanding balance until the debt is cleared, so it pays to clear the debt as quickly as possible.

Who can get a Time to Pay arrangement?

Each case is looked at on its merits, but you are far more likely to be accepted if:

• you contact HMRC as soon as you know the company is unable to pay, ideally before the due date
• all returns are up to date, including VAT, PAYE and corporation tax
• the business is viable and can pay both the arrears and future tax as it falls due
• the proposed monthly instalments are realistic and supported by a cash flow forecast
• the company has not broken a previous arrangement

The company is also expected to reduce the debt as far as it can before a plan is agreed. That can mean using cash reserves or releasing assets such as stock, vehicles or investments.

How to set up a payment plan with HMRC

Check whether you can apply online

Smaller debts can often be set up as a payment plan online through the government’s online service, as long as returns are filed and the debt falls within the online limits. You will need the tax reference, UK bank details for a Direct Debit and details of the company’s income and spending.

Call HMRC if you cannot apply online

Larger or older debts, and plans that need more time, are agreed by calling HMRC’s payment support team. Before you call, have ready how much the company owes, how much it can pay now, what it can afford each month and what other taxes are coming up. Expect detailed questions about income, spending, assets and savings, and about your ability to pay.

Back the proposal with figures

A short cash flow forecast and an explanation of why the debt built up, and why it will not happen again, make a proposal far more credible. This is where professional help makes the biggest difference.

What if HMRC refuses Time to Pay?

A proposal can be refused if the instalments look unaffordable, the plan is too long, returns are missing or the business is not viable. If HMRC refuses, or a previous arrangement fails, the debt becomes due in full and enforcement can follow quickly. Read more about what a failed HMRC Time to Pay means for your business.

How HMRC collects business tax debt in Scotland

You will be told before enforcement action starts, but the powers to recover business debt owed to the Crown are strong:

• Summary warrant. In Scotland, HMRC can obtain a summary warrant from the sheriff without a full court action. This allows sheriff officers to use diligence such as arresting the company bank account and attaching assets.
• Debt collection agencies. HMRC may pass the debt to a private debt collection agency.
• Winding up petition. HMRC is one of the most frequent petitioners against companies in Scotland. If the debt is not paid or agreed, it can ask the court to wind the company up. See our guide to winding up petitions in Scotland.

Late payment interest and, for some taxes, late payment penalties are also added, so ignoring a tax bill only increases what the company owes.

Can directors be personally liable for company tax debts?

Normally the company, not the director, is responsible for its tax. There are exceptions. The tax authority can issue a personal liability notice for unpaid National Insurance in some cases of fraud or neglect, can make directors jointly liable for tax debts in certain cases of repeated insolvency or tax avoidance, and can ask new businesses for a security deposit for VAT or PAYE. Directors who take money out of a company while it owes tax also face questions if the company later goes into liquidation. Even after a company is closed, the tax authority can still look at how its tax affairs were handled, as explained in our guide on whether HMRC can chase a dissolved company for tax debt.

When Time to Pay is not enough

Time to Pay works when the problem is a short term cash flow gap. It does not work when the company owes other creditors heavily, is making losses or cannot keep up with current tax. In those cases, other options give better protection:

• Company voluntary arrangement (CVA). A formal deal with all creditors, including HMRC, to repay part of the debt over an agreed period while the business keeps trading.
• Administration. Protection from creditors while the business is restructured or sold.
• Creditors’ voluntary liquidation. A controlled closure where the company cannot be saved. Read about creditors’ voluntary liquidation in Scotland.

In any insolvency, HMRC is a secondary preferential creditor for VAT, PAYE, employee National Insurance and CIS deductions, so it is paid ahead of most other unsecured creditors.

How McLaren Insolvency Practitioners can help

We are a Glasgow based firm at 250 West George Street, helping company directors across Scotland with HMRC debt. We will:

• review the company’s tax arrears, cash flow and other debts
• tell you honestly whether Time to Pay is realistic or whether other debt solutions are safer
• prepare the cash flow forecast and proposal that HMRC will want to see
• negotiate an agreement with HMRC on the company’s behalf
• act quickly if HMRC has already started enforcement or issued a winding up petition

The first consultation is free and confidential, so get in touch as soon as you can.

HMRC Time to Pay FAQs

Does HMRC charge interest on a Time to Pay arrangement?

Yes. HMRC charges interest on the outstanding balance for as long as the debt is unpaid, so paying the plan off sooner reduces the total cost.

How long can a Time to Pay arrangement last?

There is no fixed limit. Many business plans run for between six and twelve months, and HMRC may agree longer where the business can show it is affordable and viable.

Can I set up a VAT Time to Pay arrangement online?

Often, yes, if the VAT debt is within HMRC’s online limits and all VAT returns have been filed. Larger debts need to be agreed by phone.

What happens if I miss a Time to Pay payment?

HMRC will contact you to find out why. If you do not keep to the agreed payments, HMRC can cancel the arrangement, ask for the bill in full and move to enforcement, so speak to HMRC, or to us, as soon as you know you will miss a payment.

Can HMRC wind up my company?

Yes. If the company does not pay or agree a plan, HMRC can petition the court to wind it up. Getting advice before a petition is issued gives you far more options.

Struggling with HMRC debt? Book your free consultation today.