If you can’t meet your tax bills you can sometimes negotiate with HMRC for more time to pay. This was often a tricky process but HMRC is now being more open and helpful about time to pay arrangements. What’s the full story?
Time to pay basics
You can get a time to pay (TTP) arrangement with HMRC for any tax. If you’re in business, you can apply not just for a self-assessment bill, but payroll taxes, VAT and corporation tax. However, unlike commercial creditors HMRC won’t ever reduce the amount of debt but it will tailor a TTP arrangement to your financial circumstances.
Trap. You may not get a TTP arrangement if HMRC doubts you’ll keep up with the payment schedule. The bigger the debt, the bigger the risk, and the more information it will want from you about your finances.
Tip. HMRC has improved its guidance on TTP arrangements for individuals. Use it to find out what information it wants from you.
How long do I get?
There’s no standard or set of terms. Payment periods are as short as possible, usually twelve months or less. But for individuals there’s no longer a maximum. The key to success is contacting HMRC as soon as you think you won’t be able to pay a tax bill. If it’s before the payment deadline, ring the Payment Support Service. If the payment date has passed, ring the self-assessment payment helpline if it’s a personal tax bill.
Tip. By agreeing a TTP arrangement before the tax bill is due you’ll avoid late payment penalties that HMRC would otherwise charge.
New online TTP service
Another improvement to the TTP process is HMRC’s brand new system for applying online and thus avoiding those awkward conversations. The service can only be used for self-assessment tax bills, where you owe £10,000 or less, have no other tax debts and no other TTP arrangements. Note. payment instalments must be by direct debit.
Tip. You may not be able to use it for a tax bill that was due more than a month ago so if you still haven’t paid some or all of your 31 January 2020 bill and want time to pay you need to act fast.
Can’t pay, won’t pay
HMRC puts non-payers into one of two categories – “can’t pay” or “won’t pay”. It will put you in the “won’t pay” category if it thinks you have the financial means to pay but are playing for time. If so, it won’t agree a TTP arrangement and will fast track enforcement proceedings.
Raising finance
HMRC expects you to explore other means of raising cash to pay your tax bill before agreeing to a TTP arrangement. This might mean selling investments or borrowing elsewhere.
If you’re in business, this can be a difficult equation. You might have funds on hand but need them to meet costs like wages in order to keep trading. HMRC should take this into account and classify you as “can’t pay”. Therefore make sure you get your story straight before starting the TTP process.
HMRC has created an online facility you can use for time to pay self-assessment tax bills. For tax that was due on or before 31 January 2020 you may only be able to use the service until 29 February. To arrange time to pay for other tax bills, including those for your business, you’ll need to phone HMRC. The sooner you make contact the better.