Facing a tax bill you can't pay? HMRC's "Time to Pay" Scheme can help

Tax deadlines, whether for self-assessment, VAT, PAYE, or Corporation Tax, can create significant pressure for both individuals and businesses. If you're finding yourself in a cash flow bind and worried about meeting your tax obligations, it's crucial to remember that you're not out of options. One vital lifeline offered by HMRC is a Time to Pay (TTP) arrangement. This guide will explain what TTP arrangements are, who they're for, and how they can offer a viable solution during periods of financial strain.

What is a Time to Pay (TTP) arrangement?

A TTP arrangement is essentially a flexible payment plan agreed directly with HMRC. Instead of paying a large tax bill in one go, a TTP allows you to spread your payments over a manageable period. HMRC understands that unexpected challenges – a sudden drop in sales, unforeseen expenses, or a temporary dip in income – can impact anyone's ability to pay their taxes on time. A TTP is designed to be a pragmatic, tailored solution that acknowledges your specific financial situation.

Example

A small manufacturing company experiences a temporary dip in orders, impacting their usual monthly income. This makes it difficult to meet their upcoming quarterly VAT bill and PAYE contributions for their employees. Instead of defaulting, they can proactively contact HMRC to request a TTP, spreading those tax liabilities over the next few months to align with their expected recovery in orders.

Who is eligible and how do you apply?

Most businesses and individuals who are genuinely unable to pay their tax bill in full are eligible for a TTP arrangement. The most important rule is proactivity – you must reach out to HMRC before your payment is due. Waiting until after the deadline can complicate matters and potentially lead to penalties.

When you contact HMRC, they'll need to understand your current financial standing. This isn't about judgment; it's about finding a realistic path forward. They will consider:

• Your income and expenditures

• Any available assets (e.g., savings, investments)

• What you can realistically afford to pay each month

For certain tax types and amounts, you might be able to set up a payment plan online without needing to speak to an HMRC advisor:

• Self-Assessment: If you owe £30,000 or less, have filed your latest return, have no other payment plans or debts with HMRC, and it's less than 60 days after the payment deadline, you may qualify for an online plan.

• VAT and PAYE: For missed deadlines, if you owe £100,000 or less, plan to pay within 12 months, have no other payment plans or debts, and all relevant returns are filed, online options may be available.

If you don't meet the criteria for online application, or if you have a different tax liability (like Corporation Tax), you'll need to call HMRC's dedicated helplines. It's advisable to have all your financial information readily available during the call; being transparent will help them help you faster.

Why a TTP arrangement makes sense

Entering into a TTP arrangement offers several significant advantages:

• Manageable payments: It breaks down a large, intimidating tax bill into smaller, more digestible monthly or periodic payments, significantly easing the pressure on your cash flow.

• Avoid penalties: By proactively engaging with HMRC and agreeing to a TTP, you demonstrate your commitment to fulfilling your tax duties. This can help you avoid late payment penalties and surcharges that can quickly escalate your debt.

• Peace of mind: Financial stress is a heavy burden. Knowing you have a formal, agreed-upon plan with HMRC can provide immense relief, allowing you to focus on managing your finances and getting back on solid ground.

• Maintain good standing: Working cooperatively with HMRC shows you're a responsible taxpayer, even when facing difficulties. This can be beneficial for future interactions and your overall financial reputation.

💡Important things to remember

While TTPs are a powerful tool, they come with certain conditions:

• Interest still applies: Interest on the unpaid tax will continue to accrue until the debt is fully settled. This is an important cost to factor into your repayment plan.

• Stick to the agreement: It's crucial to adhere strictly to the agreed payment schedule. If you miss payments, the full outstanding amount could become immediately due, and further penalties might be applied. If your financial situation changes again during the TTP, contact HMRC immediately to discuss.

• Not a long-term solution for insolvency: TTPs are for temporary financial difficulties. If your business or personal finances are facing fundamental long-term viability issues, a TTP may not be the appropriate solution, and you might need to explore other insolvency options.

How we can help you navigate this

Dealing with tax issues and negotiating with HMRC can feel daunting, especially when you're under financial pressure. At Inform, we're here to simplify this process for you.

We can:

• help you accurately assess your current financial position and determine what you can realistically afford.

• assist in compiling all the necessary financial information and documentation HMRC will require.

• guide you through the application process, whether online or by phone.

• even communicate with HMRC on your behalf, if appropriate, helping to alleviate your stress and ensure a clear, professional dialogue.

Don't let an approaching tax deadline or an overdue bill cause sleepless nights. If you're experiencing financial difficulties with any type of tax liability – whether Self-Assessment, VAT, PAYE, or Corporation Tax – a TTP arrangement could be a sensible, practical approach to managing your obligations.

HMRC is often more approachable than you might think and is generally willing to work with taxpayers to find a solution. We're here to provide the expert advice and support you need every step of the way.

Take a moment to assess your situation. If you think a TTP arrangement could benefit you or your business, don't hesitate to get in touch with us. We're ready to help you navigate these waters.