Could a Time to Pay Arrangement help your business?

18 March 2020 Connor Smith Business Taxes, Covid-19

Time To Pay (TTP) allows businesses to make a formal arrangement with HMRC for tax payments to be spread over a longer period of time than they would otherwise be due.

(Last updated 26.05.20)

Although TTP is not a new concept, the recent outbreak of COVID-19 (coronavirus) has led the government to extend the existing offering of the TTP service. Rishi Sunak announced in his maiden budget that HMRC would ‘scale up the Time to Pay service to allow businesses and self-employed to defer tax payments’. This will undoubtedly be welcome news to those businesses that have already been, or indeed may yet be, impacted by Coronavirus to ease concerns around cash flow.

In order to make an application for a TTP arrangement, the business owners, or their advisers, will have to contact HMRC’s new TTP helpline specifically for businesses affected by COVID-19 to make them aware of the difficulties that the business is currently going through. This can cover Corporation Tax, VAT and PAYE.

It should be noted that any VAT liabilities arising from 20 March 2020 to 30 June 2020 can be deferred automatically until the end of the 20/21 tax year by simply not making the VAT payment on the due date. For any businesses which pay their VAT by direct debit that would like to utilise this, HMRC have confirmed that businesses should cancel their direct debit well in advance of collection so that the liability is not automatically collect.  See - more information.

When reviewing an application for TTP, HMRC will want to satisfy themselves that businesses are not trying to deliberately avoid their tax obligations whilst also considering the industry that the company operates within. It is therefore anticipated that, although the existing internal requirements for HMRC will be relaxed, businesses will still need to support their claim for a TTP arrangement to a certain extent. This could include:

  • Commentary on the current performance of the business and an achievable timeframe for payment;
  • Details of your income, expenditure, assets, investments and savings
  • Discussions on what the business owners / directors are doing to try to correct any downturn in trade;
  • Sales and cash flow forecasts (if available / possible)

Before contacting HMRC, you will need the following:

  • The business’ Unique Taxpayer Reference number;
  • The amount of tax you’re finding difficult to pay;
  • How much the business can reasonably afford to pay now and the amount the business would like to defer; and
  • The business’ bank account details.

Recently we have noticed that HMRC are refusing to agree a TTP request where employees have been furloughed and the business has made a claim for their salaries under the Coronavirus job retention scheme.  It appears that HMRC are asking employers to pay over at least the PAYE covered by the furlough grant, and only the excess PAYE due can be deferred under a TTP arrangement.  For businesses which have a mixture of staff furloughed and still working, the business will need to calculate the PAYE and National Insurance relating to the non-furloughed staff in order to determine the maximum amount that can be deferred under a TTP arrangement.

If any businesses are expecting cash flow issues and foresee that they may not be able to meet their tax payment deadline, we would recommend that they are proactive in informing HMRC before the payment becomes due rather than when HMRC chase for payment. This may allow the business the best possible opportunity for the application to be successful. If agreed in advance, it can help the business to avoid late payment penalties, although interest will still be charged (currently at 3.25%, although due to reduce in March 2020 following the recent reduction in the Bank of England Base Rate).

Ordinarily, TTP arrangements are last in the region of 3 – 6 months, however, a longer period may be agreed depending on the business’ circumstances.

Shorts’ tax team are experienced in agreeing TTP arrangements with HMRC. If you would like any assistance with putting a TTP arrangement in place, please contact us.

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