Time to Pay Support Guide
12 June 2020
Business and individual taxpayers can seek time to pay from HMRC if they cannot afford to pay their tax debts in full and on time. An agreement reached with HMRC for this is called a Time to Pay Agreement (TTPA).
In a time of national emergency, the Government has tasked HMRC to develop its TTP offering as an essential ‘lifeline’. The obvious and immediate financial impact for many taxpayers is cash flow. Who must we pay? Who will give us extra time to pay? HMRC is diverting resources to offer its Debt Management Services to a vastly greater number of people and businesses affected by COVID-19.
To help support individuals and businesses in response to the COVID-19 health pandemic, the UK government announced extra resources to assist those struggling to pay their tax liabilities due to financial distress. Upon introduction of these additional resources, HMRC were extremely accommodating to taxpayers’ requests for TTPA and asked for minimal information in support of these requests.
With effect from 30 June 2020, HMRC has however indicated that it will not be as accommodating for taxpayers needing a TTPA. It is reverting back to its ‘pre-lockdown’ position of expecting financial information to support a TTPA request. Listed below is the typical information HMRC asks for before it will agree a TTPA.
The tax helpline number is 0800 024 1222 - and is an addition to other HMRC phone contact numbers including a specialist SDLT debt management helpline on 0300 200 3844. Opening hours are Monday to Friday 8am to 4pm. The helpline will not be available on Bank Holidays. Alternatively, if the amount of tax due is less than £10,000, you may be able to apply for a TTPA online (through your Government Gateway account).
For companies and groups with a Customer Compliance Manager, any TTP requests should in the first instance be directed to them.
Best practice for agreeing time to pay with HMRC
Below are some key practical points to bear in mind if you request a Time to Pay Arrangement (TTPA) with HMRC.
- Seek TTPA with HMRC in advance of payment deadlines
- Contact HMRC by phone in the first instance
- Explain the financial hardship
- Know your desired time frame for deferral and why affordable.
- Demonstrate you are managing costs
- Explain other debt financing and borrowings
- Prepare a cash flow forecast
- Show management accounts and cash reserves
- Explain the commercial rationale
- Prepare monthly income and expense statements
- Prepare a personal statement of assets and liabilities
- Make sure tax returns and accounts filed up to date
- Check if forward interest will be charged
- Check if any late payment penalties or surcharges will apply
- What about future tax liabilities?
- Remember that TTPAs are a deferral of payments. Tax liabilities are not written off.
- Up-front payments or periodic instalments by direct debit may be requested
- More than 12 months requires a higher level of evidence
- It may be contingent on future income or the sale of an asset
- Stick to the new deadlines under the TTPA. Set up a direct debit to HMRC.
- Renegotiation may be needed, especially given the unknown timeframe for the COVID-19 impact.
Specific points for consideration
In addition to the general key practical points above, the following should be noted when evaluating TTPA requirements:
- R&D tax credits – where tax is deferred as part of a TTPA or informal arrangement, HMRC will follow the legislation and existing policy and offset any R&D tax credits against any liabilities covered by the TTPA or informal arrangement.
HMRC should be made aware of such expected credits at the outset of TTPA discussions, or notified of any subsequent credits which were not expected when a TTPA was agreed. Full and accurate disclosure of the financial position should be made to HMRC when discussing TTPA requirements.
- Coronavirus Job Retention Scheme (CRJS) - Since March, HMRC have been agreeing informal deferral arrangements with employers to include PAYE/NIC liabilities. These liabilities are postponed until the 30th June 2020 (at the latest) when, if required and appropriate, a formal TTPA will need to be entered into. If no action is taken to agree a TTPA following the end of the informal deferral period, HMRC advise they will take steps to collect the deferred liabilities if the employer is unable to settle the liabilities within 30 days.
Since agreeing these deferrals, a number of employers subsequently made and received CJRS claims, a condition of which is that it can only be used to pay employee salaries, the associated PAYE, the employer NICs and employer’s pension contributions in relation to the salary paid to employees.
Those who received CJRS grants to cover employment costs are expected by HMRC to pay the PAYE and NIC liabilities in relation to these by the normal due date – informal deferrals or TTPAs are not permitted in respect of these PAYE/NIC liabilities if employers received the CJRS claim monies. Non-payment for these CJRS related PAYE/NICs liabilities may prevent subsequent CJRS claims.
Any PAYE/NICs liabilities that are not covered by the CJRS grant can potentially be postponed and form part of a formal TTPA.