Supporting businesses with negotiating Time to Pay

Date: March 25, 2020

The Government recently announced, as part of its business support measures, that HMRC Time to Pay will apply to those struggling to pay their taxes impacted by COVID-19.

Alexander & Co can provide clients with advice on Time to Pay. Where necessary, we will negotiate directly with HMRC and ensure that all the required information, such as cashflows, budgets, forecasting and business plans are robust and up to date.

If you are unable to pay tax that is due because of the impact of coronavirus, HMRC can discuss this on a case by case basis. It has scope to explore the following:

Agreeing to pay tax on an agreed instalment arrangement
Suspending collection proceedings for debt
Cancelling penalties and interest where there are administrative difficulties either contacting or paying HMRC immediately

Time to Pay is an existing mechanism for those that are genuinely struggling to pay their taxes.

There is yet to be any specific advice on how Time to Pay would apply to businesses impacted by COVID-19, therefore we thought it would be useful to explain the current arrangements for Time to Pay and provide guidance on how to approach HMRC.

Dedicated Time to Pay helpline

HMRC has set up a dedicated helpline to help businesses impacted by COVID-19. This is 0800 024 1222. You are likely to face long delays waiting to be connected, due to the demand for this service.

Before you use the helpline, we recommend that you have collated all the relevant information you will require to discuss your case. Also considered what, if any offer you will be making to HMRC (see below).

When to contact HMRC

You should never wait until tax is due and contact HMRC as soon as you are aware that there may a difficulty. HMRC’s system doesn’t facilitate setting up arrangements to pay too far in advance, so the best time to contact HMRC is usually one to two weeks ahead of a payment due date.

Existing tax returns

Before contacting HMRC, it is prudent to ensure all tax returns are up to date. HMRC is less likely to agree time to pay if your current tax liability has not been established.

Information required to agree a Time to Pay

When speaking to HMRC, they will want to ascertain a deep understanding of your situation and how your business(es) operate. These questions can be quite invasive.

You should be prepared before you make contact. Cashflow forecasts and budgets will be important, you will need to have these to hand and ensure they are as robust as possible. If is also advised to have all financial forecasts prepared and a statement of assets and liabilities available.

What can be agreed

HMRC will not usually suggest what offer you should make. Instead, they would expect you to make the best possible offer and be able to back this up with your financial information.

They will expect a monthly direct debit to be set up and most staff have the authority to agree a Time to Pay arrangement of up to 12 months. In some circumstances, longer repayment periods may be agreed, but these may require further analysis and more senior approval by HMRC.

In reaching an agreement, it will be expected that all future tax liabilities are met. Failing to do so may impact the Time to Pay agreement.

You are more likely to obtain agreement for profit-based taxes, such as corporation tax and income tax. Other taxes such as PAYE and National Insurance contributions are expected to be paid, as these are collected on behalf of the Exchequer.

Penalties and interest

If a formal time to pay arrangement is in place at the trigger date for the late penalties, these will not be charged.

Interest however is not normally waivered by HMRC, unless the delay is directly a consequence of HMRC’s activity.

It is not clear yet whether penalties or interest will be charged as a result of COVID-19, however we believe a similar approach will be taken as is currently the case.

Caution on agreeing to time to pay plans

When agreeing a Time to Pay arrangement with HMRC, it is important to only agree what you can afford. If a workable arrangement plan cannot be reached, it would be prudent to take professional advice.

If an agreement plan is not kept, HMRC are less likely to agree a revised plan. Similarly, if you have agreed a plan, that was affordable at the time of agreement and your circumstances change for the worst, it is important to notify HMRC as soon as possible, before a default occurs.