UPDATE Could a Time to Pay Arrangement help your business?

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 26.10.20)

The Government announced that, with effect from 1^st October 2020, Self-Assessment taxpayers can apply online to help spread the cost of their tax liability becoming due by 31^st January 2021 into monthly instalments, without the need to call HM Revenue and Customs (HMRC).

The online payment plan service could previously only be used to set up instalment arrangements for paying tax liabilities up to £10,000. HMRC has increased this threshold to £30,000, to help ease any potential financial burden experienced due to COVID-19.

To be eligible for the online payment service taxpayers must meet the following criteria:

- No outstanding tax returns
- No other tax debts
- No other HMRC payment plans set up
- The debt must be between £32 and £30,000

The payment plan must be arranged no later than 60 days after the 31^st January 2021 due date and interest will still be applied to any outstanding balance from 1^st February 2021. However, if you pay the tax owing under the arrangement on time you will not be liable to late payment penalties which are usually charged when tax remains unpaid 30 days, 6 months and 12 months after the due date for payment.

If you have not prepared your Tax Return for the year ended 5 April 2020 you must do so before you can utilise this service. Please contact a member of the personal tax team at Shorts if you require assistance preparing your Tax Return. Once your Tax Return has been filed you will need to wait at least 48 hours before you can set up your Time to Pay arrangement online.

Please refer to the Government website and select the option to ‘set up a payment plan online’. The online payment plan service is unavailable to agents, therefore taxpayers must register for their own Government Gateway to utilise the service personally. If you do not already have a Government Gateway account you can register one at the same time as applying.

lf liabilities are in excess of £30,000, or you need longer than 12 months to pay your debt in full, you may still be able to set up a Time to Pay arrangement by calling the Self-Assessment Payment Helpline on 0300 200 3822.

(Previously 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.