Coping with Covid 19 ~ HMRC Time to Pay Arrangements
As a result of Covid 19, all businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time to Pay service. In this report we examine what this means in practice.
When to make contact:
In general, it is advisable to contact HMRC as soon as difficulty making payment is expected. The best time to phone HMRC is usually one to two weeks in advance of the due date for payment.
Make sure returns are up to date:
HMRC is more amenable to agreeing time to pay if returns are up to date and the correct liability has been established.
Cash flow forecasts and budgets:
Before phoning HMRC it is advisable to have financial forecasts and a statement of assets and liabilities available. HMRC will expect the taxpayer to make the best offer they can and will not usually make suggestions about the amount it will accept as a regular payment.
HMRC authority to agree time to pay:
HMRC will usually expect to set up a regular monthly payment plan with collection by direct debit for periods up to 12 months. Debts of more than £100,000 or where longer payment periods are needed will usually be escalated to more senior staff within HMRC.
Expect robust questioning:
HMRC are expected to be more sympathetic to requests for time to pay in the current environment. However, depending on the amount due, in normal circumstances negotiating time to pay can involve what feels like personal and intrusive questioning. It is important to make HMRC aware of all information which might be relevant, as calmly and professionally as is possible, in what may well be a robust conversation.
No agreement may be better than an unaffordable agreement:
It is often better to conclude a phone call to HMRC having failed to reach an agreement rather than having agreed an arrangement which the business cannot afford. If a time to pay agreement is not kept to, it will be difficult to get HMRC to re-negotiate it and HMRC will be more reluctant to make agreements with you in the future.
If an agreement has been reached and your circumstances then change, it is advisable to contact HMRC, before missing any payments, to renegotiate the arrangement. If a formal time to pay arrangement cannot be reached, it is usually advisable for the taxpayer to pay what they can when they can, as this shows willingness to pay and may delay further enforcement action by HMRC.
Future tax liabilities:
A standard term of HMRC time to pay agreements is that future tax liabilities are paid in full as they fall due. Where this is not possible it is necessary to contact HMRC again to renegotiate the arrangement to include the new debt. HMRC is often reluctant to agree repeated requests for time to pay but may be more amenable in the current situation.
Which debts to prioritise:
HMRC is usually more willing to consider agreeing time to pay for profits based taxes such as income tax and corporation tax than for taxes such as VAT and employees’ PAYE and National Insurance contributions, which businesses are effectively collecting on behalf of the Exchequer. The usual advice is to prioritise paying VAT and employer liabilities as HMRC pursues these more actively. We do not know whether this will change in the current situation.
Late payment penalties and interest:
An advantage of a formal time to pay arrangement is that late payment penalties will not be charged if the arrangement is in place at the trigger date for the penalties. In normal circumstances, HMRC does not waive interest unless the delay in making payment is somehow directly attributable to HMRC.
We do not yet know whether HMRC will be more willing to waive penalties and interest in the current situation and the position should therefore be reviewed.
