Time to pay agreements can be a vital way of allowing a company to get back on its feet. But care must be taken not to make the situation worse. Let our expert team help you today.
Time to pay agreements are the most common form of negotiated agreement that can be entered into between HMRC and the taxpayer. The taxpayer will normally be a company or an individual trading their business, with tax arrears, which most predominantly will be VAT but may also extend to PAYE/NIC and corporation tax.
- a time to pay agreement will usually be a deferred arrangement over a period of time and 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
- therefore it is never a wise idea to hope for a time to pay agreement in the future but it is far better to deal with things now and to enter into negotiations as soon as possible whilst you/the company have a good record and HMRC are more receptive to your approaches.
Once HMRC pass matters to their debt enforcement department, it is usually the case that all room for negotiation disappears and your options diminish.
HMRC’s business payment support services will consider any application to enter into a time to pay agreement. This is easily accessible online but is regarded by HMRC as a one-off service – it cannot be relied on for continuous periods and exists to provide companies and businesses with support for that one occasion where their tax liability may otherwise cause the business to cease trading but is capable of being remedied.
The advantage of a time to pay agreement is that, as with all early engagement, it can limit the additional charges that will otherwise be applied against late filing of returns or late payments and set your company or business on the road to recovery.
Period of agreement
The period of any time to pay agreement will usually be between 3 – 6 months, depending on the conduct to date, but may in certain circumstances be available up to a maximum of 12 months, and only if HMRC are genuinely persuaded that the business or company are unable to pay the tax liability immediately.
- the time to pay agreement will not serve to reduce any of the sums 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);
- HMRC may withdraw the time to pay agreement at any time where there is default of any of the conditions. These conditions mainly refer to circumstances of default or where information becomes available that indicates the time to pay agreement was entered into on the basis of false or misleading information.
Important to remember
A time to pay agreement does 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. Accordingly, following acceptance, your business may find itself subject to the stress of two tax liabilities, the trading aspect and the ongoing liability under the time to pay agreement.
- a time to pay agreement should not be entered into lightly and it is only appropriate to companies and businesses that are facing short-term funding or cash-flow difficulties but otherwise are able to manage the financial constraints of the time to pay agreement going forward;
- we often find that a time to pay agreement is instead used to delay the inevitable, which can only make the situation worse for those who own and run their business, as company directors can be personally liable in certain circumstances.
A time to pay agreement may be inappropriate where the company or business is struggling and there is no reason to suggest this inability to meet tax liabilities will not be repeated – as stated above it is designed as a one-off option and is not intended to be relied on to support the company or business’ continued trading (which in effect is wrongful trading).
In such circumstances it may be more appropriate for your company or business to consider restructuring its debts or seeking an alternate insolvency procedure.
At Francis Wilks & Jones we regularly act for directors and individuals who need assistance exploring these options, including negotiating a time to pay agreement with HMRC. We can also assist and advise on restructuring issues and whether there is an alternative to the time to pay agreement as described above. Please call any member of our tax disputes team for your consultation.