Time to pay agreements advice for individuals

• Key contacts
• Case studies
• FWJ takeaway

Overview

Time to pay arrangements are the most common form of negotiated agreement that can be entered into between HMRC and a taxpayer.  The taxpayer will conventionally be a company or an individual trading their business, with tax arrears, which most predominantly will be VAT but may also extend to PAYE and Corporation Tax. However, an individual can also enter in to a time to pay arrangement with HMRC, where they are faced with unpaid tax that is unrelated to business trading.

• A Time to Pay Arrangement will usually be a deferred arrangement over a period of time
• We have seen over the years that HMRC’s flexibility and treatment of such arrangements does vary according to government policy and the political mandate of the time.

We would always recommend early engagement with HMRC where there is a concern regarding the payment of tax due. In our experience, it is better to be proactive in the approach with HMRC.

Approaching HMRC

HMRC’s Payment Support Services will consider any application to enter into a Time to Pay Arrangement where no payment demand has been issued by HMRC. 

• this is easily accessible and HMRC will, when considering an application, identify what your income and expenditure is, what assets you have and what steps you have taken to get your tax affairs in order;
• HMRC are likely to raise additional enquiries where a previous time to pay arrangement has been entered in to.

Where HMRC are satisfied that an individual is genuinely unable to pay the tax due in full and that a time to pay arrangement will allow a tax player to bring their tax affairs up to date, over an agreed period of time, HMRC will agree a repayment plan that has regard to your personal financial circumstances.

A Time to Pay Arrangement will help you avoid the additional charges that will otherwise be applied by HMRC. 

Period of agreement

The period of any Time to Pay Arrangement will vary depending on your personal circumstances.

Where the inability to pay taxes is due to the Covid pandemic, HMRC are (at the time of writing) providing additional support to tax payers in financial distress.

The Time to Pay Arrangement will not reduce the tax due and will have to include all penalties, interest and surcharges previously applied, hence the need to ensure that negotiations are commenced early on to mitigate such costs.

Default under a Time to Pay Arrangement

HMRC may withdraw a Time to Pay Arrangement at any time where there is default of any of the conditions. It is therefore important to make sure that all repayments are made on time.

HMRC may withdraw a Time to Pay Arrangement that was entered into on the basis of false or misleading information.

Important issues to remember

There are a number of things it is sensible to bear in mind about time to pay agreements

• they do not suspend the need to file returns or make payments to HMRC for ongoing liabilities – it is merely an agreement whereby HMRC are willing to suspend enforcement of the outstanding tax liability in exchange for an agreement to repay such sums by instalments over a fixed term;
• they should not be entered into lightly and it is only appropriate where an individual is facing short-term cash-flow difficulties but is otherwise able to manage the financial constraints of the Time to Pay Arrangement going forward;
• they may be inappropriate where an individual will struggle to meet future tax liabilities alongside a time to pay arrangement. In such circumstances, it may be more appropriate for an individual to take advice regarding debt management or an insolvency process.

At Francis Wilks & Jones we regularly act for individuals who need assistance exploring their options, including negotiating a Time to Pay Arrangement with HMRC. Should you require any assistance, please contact our Director Services team who can discuss such matters with you.

Andy Lynch at FWJ was literally a life saver for me. I ran in to some tax issues with HMRC and I suffer from mental health issues as well so I was a complex case. Andy took his time to professionally and accurately layout my case and assist me with finding a resolution. I researched a lot of tax advisers before making my decision and I am glad I did and relieved that I chose Andy and FWJ.

Chris Kitchen