How to Buy Time When You’re Struggling With Paying HMRC
There are few things so frightening in business, or indeed in life, as
All about time to pay agreements
A Time To Pay (TTP) agreement aims to give a struggling company time to meet its tax obligations, thus allowing it to remain in business. Unsurprisingly, such arrangements are not offered automatically and are very much a privilege rather than a right.
The agreement is made with HMRC and covers arrears of corporation tax, VAT and PAYE, meaning you will need to remain up to date with new bills, and it’s vital that you let HMRC know as soon as problems emerge, rather than allowing things to slide for months on end.
Typically, your TTP agreement will give you three to six months to make up your arrears, but other periods may be negotiable.
The nitty-gritty of the negotiation
First and foremost, HMRC will wish to see that you can adhere to any agreement. There’s no point in them negotiating an outcome only for you to default again. They will therefore expect to see detailed forecasts of sales, expenditure and cash flow for at least the next six months.
Equally importantly, you should be able to demonstrate how you plan to reduce your operating expenses to free up cash for tax.
Naturally, HMRC will wish to recover the money as fast as possible, so they may pressure you to agree the shortest possible TTP. There is no point in agreeing to an unrealistic payment plan, and as already noted HMRC will not be sympathetic if you default.
You should therefore stand your ground and make sure that any agreement is financially feasible as well as acceptable to both parties.
If you’re struggling to make headway with your discussions, you can involve a professional negotiator. The fees you pay will almost certainly be more than offset by a more positive outcome.
How will HMRC reach a decision?
There are a number of factors that will influence HMRC’s decision whether to offer you a TTP, and of course over what period. They’re less likely to be amenable if you operate in a high-risk sector, and will certainly be less flexible if you have a record of payment problems.
Communicating quickly and fully will definitely go in your favour, as will your ability to demonstrate that you are suffering from a temporary cash flow setback rather than a structural inability to make money.
Will interest and penalties be payable?
Penalties are not usually levied when a TTP is agreed, which is another reason that this can be an excellent solution for a struggling business. HMRC will normally levy interest on the late payments, though, and will not be slow to slap on penalties should any payments be made late under the agreement.
Will a TTP count against your business in the future?
No. HMRC is pragmatic and recognises that even the best-run businesses can hit a cash flow crisis from time to time.
Provided you adhere to whatever you agree, your company should not find itself subject to any additional scrutiny, or any negative consequences, in the future.
Can more than one TTP be implemented at a time?
No, so make sure whatever you agree to in paying HMRC covers all your outstanding tax debts. There is no point whatever in negotiating, say, a TTP for a large VAT bill only to receive a corporation tax bill you cannot pay a couple of weeks later.
Whatever you agree with HMRC should leave you with enough money to make anticipated tax payments, of whatever type, on time and in full whilst you steadily clear your arrears.
What happens if your TTP goes wrong?
Of course, the successful conclusion of your TTP negotiation isn’t the end of the process. You have to adhere to the payment plan.
In exceptional circumstances, it may be possible to renegotiate a Time To Pay Plan, or to implement a new plan once an existing TTP agreement has been satisfied. However, HMRC would need to see strong evidence that the business is turning itself around and has a viable future. If they believe the problems are structural in nature, they are unlikely to be compliant.
Fail to maintain payments or renegotiate your TTP and HMRC will very quickly withdraw the arrangement and demand immediate and full payment.
When you are unable to comply, enforcement action will be implemented. Should this happen, you will immediately need to seek professional liquidation advice, which could include selling assets to raise funds or entering into a formal insolvency procedure.
The key points to remember in paying HMRC
At all times, you should bear in mind the following:
- When you have problems paying HMRC, you need to tell them immediately. Simply missing a tax payment, or a payment under a TTP, without explanation is a recipe for disaster.
- You will need to support your application for a TTP with evidence of your financial circumstances: a vague assurance that you will pay counts for nothing.
- Any agreement you reach must be realistic: there is no point in agreeing to repay HMRC in three or six months if you believe your cash flow will not permit this.
- A professional negotiator can get the best possible outcome for you, and could prove well worth the fee.
- Your tax bills are the most important debts you will ever have, as HMRC does not require a court order to implement aggressive recovery tactics.