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HMRC Debt and Time to Pay Arrangements

It is not uncommon for businesses to fall behind with payments due to HMRC, in relation to taxation or VAT. This could be the result of poor cash flow, or any other event which has a negative impact on the company’s financial position.

In these circumstances, essential payments such as rent, utilities, wages or payments due to key suppliers may be prioritised, leaving arrears to HMRC. If arrears are not addressed swiftly, interest and penalties may be added to the debt and the situation is likely to become more difficult to manager.

However, a Time to Pay Arrangement could allow your business to pay debts due to HMRC over a longer period of time than would otherwise be available.

What is a Time to Pay Arrangement?

Time to Pay Arrangements are dealt with on a case-by-case basis. HMRC will review what the business owes, what it can afford to pay, and then consider how much time is needed to pay.

A Time to Pay Arrangement can cover all outstanding amounts, including accrued interest and penalties. They are usually agreed over a six or twelve-month period, but payment terms can be longer if there is a realistic prospect that the debt will be repaid. If your business needs a lengthy repayment term it is possible that a formal insolvency process may be appropriate.

What will HMRC want to know?

HMRC will want information about the company before agreeing to provide additional time.

Generally, they must be satisfied that the request is genuine and will consider various factors, including the company’s filing and payment history. Before you contact HMRC, consider:

• What liabilities are outstanding?
• When was payment for these liabilities due?
• How much can the business realistically afford to pay, and when?

This must be supported by suitable evidence. You should also consider that in addition to repaying historic liabilities the company must also be able to keep up to date with its future liabilities, as and when they become due.

Putting together repayment proposals can be daunting and you may wish to seek advice from an experienced Insolvency Practitioner who can negotiate with HMRC on your behalf.

What if HMRC refuses a Time to Pay Proposal?

HMRC are not obliged to accept your proposal. They can refuse an arrangement for various reasons, such as:

• Failure to submit returns; or
• failure to submit then in a timely manner; and
• Failure to submit sufficient financial information in support of your proposal; and
• Failure to demonstrate that your proposal is achievable; and
• A previous arrangement which was not adhered to.

It is also worth remembering that Time to Pay Arrangements can only deal with HMRC debts and has no impact on other creditors. If your business has other creditors in addition to HMRC then it may benefit more from other options.

Can an Insolvency Practitioner help?

If the financial problems are temporary and can be overcome, you can prepare a turnaround plan. If the problems are more severe, or the impact has already been too great, you should speak to a Licenced Insolvency Practitioner to consider what options are available.

Keywood Group is a Licenced Insolvency Practice with offices in Birmingham and London, although we cover the whole of England and Wales. Our team has extensive experience in advising businesses on the options available. We will always provide transparent advice on the implications of each option and ensure that you fully understand the relevant process.

Our Insolvency Practitioner is fully licenced and regulated by The Insolvency Practitioners Association. If you want further information, please contact us for a no obligation chat.

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