As we come out of the coronavirus pandemic, the various support packages which were available to individuals and businesses during this difficult time are fast becoming a thing of the past.

It can therefore be easy to forget that there remains a more general support mechanism available in appropriate cases for those struggling to meet their self-assessment (including corporation tax for companies) tax liabilities.

Time to Pay (TTP)

HMRC’s TTP service has been in place for a number of years and as we approach the due date (of 31 July 2022) for the self-assessment second payment on account for the year ended 5 April 2022, now is a good time to remind ourselves of how this works.

In situations where a taxpayer is having difficulty meeting their tax liabilities in a timely manner, TTP can be a valuable lifeline for individuals and businesses going through tough times by allowing these liabilities to be settled in instalments.

It must be remembered there is no statutory right to TTP and HMRC will consider suitability on a case-by-case basis.

Contacting HMRC

The starting point for a taxpayer is to contact HMRC either by telephone on 0300 200 3835 or by using the online service.

The taxpayer will need a government gateway account to access the online service.  Arranging an instalment plan online can be a quicker and more efficient way to set up your plan but is only available where the taxpayer:

  • has filed their latest tax return
  • owes under £30,000
  • is within 60 days of the payment deadline and
  • can settle the debt in instalments within the next 12 months

If the situation falls outside this, a call to HMRC will be required.

It is unusual for instalments of more than 12 months to be agreed and HMRC will normally seek to agree a payment plan over the shortest period possible.  They will also wish to know how much can be paid by the due date.

While interest on late paid tax will continue to arise, agreeing an instalment plan with HMRC before the tax in question falls due will ensure penalties are avoided if the terms of the agreement are honoured.

Information needed

When calling HMRC, various information should be to hand because they will ask a number of questions/seek assurance the taxpayer has taken various actions before they determine whether a TTP arrangement is appropriate.

Some of these questions/points to bear in mind are:

  • HMRC will wish to understand why the tax payment cannot be made in a timely manner. It will be necessary to give some details here e.g. for a business, a one-off event such as losing a large customer may have put an undue strain on cash-flow.
  • As understandably HMRC do not wish to effectively be ‘lender’ unless it is a last resort, they will want to know what the taxpayer has done to try and meet the liability in a timely manner e.g. raising loan finance, use of bank overdrafts, use of credit cards, use of savings.
  • HMRC are likely to ask what changes the taxpayer has put in place to ensure they do not need to apply for instalments again going forward e.g. if it is a business, maybe customer credit terms have been tightened/credit controls have been improved, more beneficial supplier payment terms have been negotiated and/or discretionary expenditure has been curtailed.
  • For a business, projections may be required to show the business can honour any instalment plan which is agreed.

The author takes every care in preparing material to ensure that the content is accurate and up to date. However, no responsibility for loss occasioned to any person acting or refraining from acting as a result of this material or from making use of this material can be accepted by the author. 

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