Paying taxes are a necessary business expense for everyone, from limited companies to sole traders but it can be a drain on cash flow especially if it hasn’t been planned for. This is where an HMRC time to pay arrangement comes in!
With VAT, corporation tax, PAYE and income tax among others to think about, remembering to put some money aside for your tax bill is probably way down on your priority list, but by not managing cash flow for impending tax bills, it can be a hard blow to businesses when those tax bills become due.
Due to the covid pandemic, cash flow resources have been hugely drained leading to businesses using their cash reserves to survive with little to no support from the UK government. Unfortunately, tax bills have still arrived in offices around the country and many businesses are struggling to pay.
So, how do you deal with these tax bills when cash is thin on the ground?
What is a HMRC time to pay arrangement?
Luckily, the HMRC are well versed in businesses and their owners needing a little extra support when paying their tax bills, and this is where a time to pay arrangement comes in.
A HMRC time to pay arrangement is a service offered by the HMRC to spread out your business tax payments over a longer period of time in a more affordable way.
You can agree a more affordable payment plan for your tax bills to provide some breathing space and allow cash flow to improve.
How do I set up a HMRC time to pay (TTP) arrangement?
Time to Pay (TTP) arrangements are designed to support businesses that are viable and not insolvent, so this is generally for businesses that are suffering temporary cash flow issues, not those that are trading knowing they cannot pay their bills (insolvent).
If HMRC believes that a business is at risk of becoming insolvent, they may act quickly to recover any unpaid tax bills, so a time to pay arrangement is only for those businesses which are fundamentally viable.
It is always in a business’s best interest to be proactive with HMRC – don’t wait to receive a brown envelope from them because your tax payment was late. The reason the time to pay arrangement even exists shows that the HMRC understands that problems will arise and are willing to help, but the responsibility remains with you to get in touch with them. You can call them on
What taxes are covered by a time to pay?
A HMRC time to pay arrangement is used for arrears of VAT, PAYE and corporation tax, but can also be used if you have payments due that you may not be able to meet in time to help you avoid a late payment penalty.
A time to pay arrangement isn’t guaranteed to be accepted by the HMRC, and they will want to look at your payment history to make sure you have paid all previous tax bills (that aren’t under a time to pay arrangement).
If a HMRC time to pay arrangement is agreed, it is important that you stick to making on time and in full, otherwise the HMRC could cancel the arrangement, and request repayment of the total debt and applying a range of penalties.
It’s important to note that if the HMRC do agree a TTP, they will likely levy interest on the amount to be paid, but penalties may be lifted if you have made contact with the HMRC quickly and acted responsibly.
If taxes aren’t really your thing, we can help. Our team of advisers are here to help you navigate what to pay and when. Let’s talk!
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