Time to Pay Arrangements

If your company has or expects a debt with HMRC, even if the debt is not overdue yet, you should think about applying for a Time to Pay arrangement. Unexpected expenditure or bad debt can quickly have an impact of business cash flow. As the most common business creditor, debts to HMRC can rapidly become out of control.

If a Time to Pay arrangement can be agreed, it will hopefully give you a bit of cash flow breathing room.

What is a Time to Pay arrangement?

The Time to Pay arrangement is a government initiative that was introduced in 2008. It was brought in to allow struggling businesses to stave off the effects of the recession. The scheme allows a businesses who are struggling to spread their outstanding corporation tax, PAYE, national insurance contributions and VAT liabilities over instalments, rather than paying them in one lump sum.

Time to Pay arrangements usually last either 6 or 12 months, but if there is a realistic expectation the debt will be cleared, longer payment terms may be agreed.

What are the benefits of a Time to Pay arrangement?

It is important to remember that your liabilities to HMRC will not disappear. Making an arrangement with HMRC will help alleviate the pressure to pay what you owe in one lump sum.

By spreading out your repayment over a number of payments, you will improve your cash flow and ensure that your business has money to pay other outgoings such as wages, rent and suppliers.

By seeking a Time to Pay arrangement, you are showing HMRC that you are willing to settle your debt. This can help your business remain on good terms with HMRC, reducing the likelihood that they will take enforcing action against your business.

Is a Time to Pay arrangement right for me and my business?

A Time to Pay arrangement is suitable for any business, whether they are a sole-trader, limited company or a partnership. The arrangement is useful where any business has accrued arrears during a cash flow shortage. This shortage could be caused by unexpected costs, bad debt or even forced shutdown during a global pandemic. No amount of business planning can account for every scenario. If there is a legitimate expectation that your business can return to financial stability, we expect HMRC will agree to a Time to Pay arrangement. We would suggest it would be prudent to seek advice and support sooner rather than later.

How do I set up a Time to Pay arrangement?

We’re here to help. The first step towards a Time to Pay arrangement is assessing the finances of your business. The financial assessment will scope out the viability of a Time to Pay arrangement for your business.

We’ll assess the business finances, along with any correspondence you have had with HMRC. Understanding your situation will allow us to put together a repayment proposition and reasoning statement together to be presented to HMRC.

We will demonstrate to HMRC that you have both the ability and the intention to clear your arrears over a fixed payment plan.

If our proposal is accepted by HMRC, your Time to Pay arrangement will commence as planned. The arrangement will conclude once all your payments have been made along with any interest have been paid. You will also need to ensure that your tax returns are submitted.

Why would my proposal be rejected by HMRC?

There are a number of factors that could cause HMRC to reject your Time to Pay arrangement request.

  • Late or overdue tax returns
  • Failure to keep up with previous arrangements
  • Not enough financial information to support you’re application
  • Your arrears were not caused by short term cash flow issues
  • The proposal is not considered achievable by HMRC

In the event that HMRC rejects your proposal, don’t give up hope. We can still help. Firstly, we would look at the reason why. If you were rejected because you didn’t provide enough financial information to support your application, it could be a simple task of resubmitting your proposal with more in-depth financial analysis.

If you’ve been rejected because of your previous history with HMRC, then we can help you look at other options for business recovery. You may be best suited to looking at alternative funding. If there are other creditors as well as HMRC, then you may be best looking towards a formal restructuring process such as a Company Voluntary Arrangement (CVA) or administration.

If your businesses has substantial debt that makes it impossible to continue trading, you could be looking towards closing the company through a Creditors’ Voluntary Liquidation (CVL) before the creditors force the business into compulsory liquidation.

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Wosskow Brown Solicitors are here to help rescue your business. Call us today for a no obligation chat. We have a fantastic history of helping businesses and business owners, it’s the very foundation that Wosskow Brown was founded on over 30 years ago.

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