Iain Rankin looks at how businesses and individuals may make use of ‘time to pay’ arrangements to defer payment of tax bills, in light of the current coronavirus crisis.
HMRC has already announced the deferral of quarterly VAT payments due before 30 June 2020 until 31 March 2021, and a delay to self-assessment payments on account due by 31 July 2020 to 31 January 2021.
One further measure available to businesses is ‘time to pay’. TTP further defers a business’ tax liability. However, at a later date businesses will have to deal with settling current and historic debts to HMRC. Deferring HMRC tax debt can free up business funds to pay staff or other creditors.
What is TTP?
TTP can be requested in cases when a business or individual is unable to pay a tax bill in full by the due date. HMRC can use its discretion to allow payment over a period of time.
A TTP arrangement would normally only be agreed if HMRC are satisfied that you will have the means to pay the taxes included in the TTP arrangement in the future, as well as any other tax liabilities becoming due during this period.
HMRC has set up an additional helpline (0800 024 1222) to support businesses who are concerned about not being able to pay their tax due to the Coronavirus.
What to expect when speaking to HMRC?
You should have available:
- Your reference (your 10-digit UTR or VAT number);
- The amount of the tax bill that you are unable to pay and the reasons why;
- What you’ve done to try to pay the bill;
- How much you can pay immediately and how long you may need to pay the rest;
- Your income and expenditure;
- Your assets, like savings and investments.
HMRC is likely to ask a number of questions to ascertain the position of the business, what is being done to help turn the situation around and to understand the prospect of settling liabilities in the future. However the questioning appears to be less robust than previously.
Tips for dealing with HMCR
- Ensure that all returns are up to date. HMRC will be more amenable to agreeing a TTP arrangement when the liability is clearly established
- Be proactive. Once returns are submitted, contact HMRC 7-14 days in advance of payment due date.
- Prepare a cashflow forecast – business and/or personal - and a statement of assets and liabilities.
- Obtain a realistic period for the TTP repayments to be made. The agreement can be cancelled if broken. Longer periods than 12 months will be escalated to senior HMRC staff.
- Demonstrate that all reasonable steps have been taken to cut costs and that other creditors are also being asked to accept deferment.
As part of a TTP agreement, it is expected that future tax liabilities are paid in full as they fall due. Any new debts which cannot be paid would need to be renegotiated with HMRC. Similarly, HMRC might be reluctant to agree to a TTP where there are existing tax debts.
Additional guidance for VAT returns
Whilst there are measures already in place to defer payment of all businesses’ next VAT liability, you should:
- Submit your VAT return on time, even if you cannot pay the full amount;
- Phone HMRC before the payment due date, but after the return has been filed;
- Cancel existing VAT Direct Debit.
Summary
Time will tell how amenable HMRC are with TTP arrangements under the current circumstances. However, I would expect HMRC to be sympathetic to businesses wishing to use cashflow to pay suppliers and employees first, since keeping businesses and individuals solvent will help the Exchequer in the long run. Good communication with HMRC is essential.
