HMRC Time to Pay Guide

HMRC introduced time to pay to help individuals and businesses pay a debt in smaller more manageable portions over an agreed period of time.

By allowing taxpayers and businesses to distribute their tax debt via monthly payments it helps reduce the financial pressure and ensures that HMRC continues to receive what is owed in a timely manner.

To be eligible for a time to pay arrangement with HMRC you must meet certain criteria and contact HMRC within specific timescales.

Time to pay arrangements are available to individuals who owe income tax and businesses to cover bills associated with income tax, VAT, corporation tax and PAYE.

Importantly using time to pay can prevent unnecessary HMRC penalties and interest charges for late payments of income tax.

What is an HMRC Time to Pay arrangement?

An HMRC time to pay arrangement is essentially a structured payment plan for settling tax debts over a mutually agreed timeframe.

These arrangements are essentially agreements made with HMRC to spread the cost of your tax bill and in most cases ends up as just another direct debit from your bank account until the debt is fully paid off.

The setup is structured to offer flexibility rather than being a rigid, official agreement.

It can be modified by both sides as time passes meaning it can be reduced if your income increases or if you come into an unexpected sum of money (like winning the lottery).

Similarly it can be extended if your necessary costs go up or if your earnings decrease.

It’s crucial to remember that delaying sorting out your tax issues can lead to bigger problems in the future which is why HMRC encourages individuals and businesses to reach out as soon as possible.

What is the Time to Pay criteria?

To be eligible for the “Time to Pay” plan you (or your business) must meet several criteria.

For an online time to pay application to be successful you must:

  • Be up to date with all self assessment tax returns.
  • Have no outstanding tax bills.
  • Owe no more than £30,000 in tax.
  • Set up your “Time to Pay” plan within 60 days of your payment deadline.

Those who have other payment plans with HMRC or cannot pay other tax bills, or owe more than £30,000 in tax cannot use the online platform and should contact HMRC by phone to discuss the potential of a payment plan for your tax arrears.

How long does a Time to Pay arrangement last for?

HMRC doesn’t provide a definitive maximum period for a time to pay arrangement. Generally the average duration for a time to pay arrangement is up to twelve months.

How do I set up a Time to Pay arrangement?

In most cases you should be able to set up a time to pay arrangement online without needing to speak to HMRC directly.

HMRC have done a good job in making the process relatively painless and being able to do it online let’s you submit your application at a time that’s convenient to you.

You can you use your .GOV government gateway account to submit your time to pay request to HMRC.

Time to pay for individuals:

The time to pay arrangement will initially be based on an ‘income and expenditure assessment’ form.

An income and expenditure form is used by HMRC to evaluate your earnings, liquid assets, and expenses so they calculate your net income remaining after all expenses.

HMRC generally anticipates that you’ll pay no more than 50% of your net income but this could be more if HMRC deem your disposable income as being very high.

A time to pay arrangement can cover your settlement payment, first and second payments on account, along with any additional fines on your self assessment account.

Be aware that HMRC will charge interest on any tax due that is paid past its due date.

Time to pay for businesses:

HMRC recognises the random nature of business finances and doesn’t take a one size fits all approach to business time to pay applications.

Initially HMRC will need you to share your estimate of how much the business can afford to repay.

HMRC will then go through your suggestion and if necessary engage you in a discussion about it to ensure that it’s feasible and enables the fastest possible debt repayment.

The duration of the agreement will hinge on the total amount your business owes and your business’ financial situation.

After a successful application has been approved HMRC reserves the right to regularly review and adjust your time to pay arrangement.

For example your arrangement can be reduced in length if your company’s financial situation gets better or extended if your company’s financial condition deteriorates but still has the potential for recovery.

What do I need to set up a Time to Pay arrangement?

Before initiating a conversation with HMRC you should ensure you have as much information available as you can to help make it as smooth as possible.

Checklist for time to pay for individuals:

  • Your national insurance number.
  • Your self assessment unique taxpayer reference number.
  • The identification number associated with the tax bill(s) you are unable to settle including all outstanding debts to HMRC.
  • Your explanation as to why you can’t make the payment in full and need a TTR arrangement.
  • A summary of your present financial situation (covering income and expenses, savings, investments, and other assets).
  • Your banking details so you can set up a Direct Debit for your agreement.

Checklist for time to pay for businesses:

  • Your businesses unique tax reference number.
  • The reference number relating to the income tax bill you wish you discuss.
  • Details of any other debts owing to HMRC.
  • Details of any tax refunds due to your business from HMRC.
  • Details about the financial status of your business.
  • Explain the measures that have been undertaken to secure the funds to offset the company’s debt.
  • Your business banking information for the purpose of setting up a Direct Debit (the individual making the call must have the power to establish a Direct Debit on that account).

Can my TTP arrangement application be rejected?

HMRC has the authority to reject a time to pay application with successful TTP approval rates around 90%.

As part of the process you must present a compelling rationale as to why you’re unable to meet your tax obligations on time and outline your repayment strategy.

They will normally require proof of your current expenses and predicted earnings and importantly  demonstrate a serious intent and resolve to repay your tax debt in full.

Having a prior TTP agreement doesn’t disqualify you but it might decrease your chances of approval.

Only commit to affordable monthly TTP payments

Try to avoid succumbing to pressure to agree to a monthly sum that you cannot realistically meet in your arrangement to pay HMRC.

You should take time to ensure you can meet the continuing tax repayment obligations and if you need to find some expert advice and assistance to help you find a workable solution for both parties.

There’s no point in agreeing to a figure if you know you’ll fail to pay a month or two later. This can lead to HMRC’s faith in you diminishing and cause further issues.

Being honest is the best option by telling HMRC that you don’t intend to disappoint them by agreeing to an unmanageable plan.

Show them that you’re treating the situation with the seriousness it deserves, as rightfully HMRC views the tax arrears as public funds.

What happens if you don’t adhere to a TTP arrangement?

HMRC’s leniency may come to a sudden halt if you fail to fulfil a payment agreement you’ve previously negotiated.

If you fail to meet your agreed payments the time to pay arrangement is likely to be terminated by HMRC which could result in penalties.

Avoidance of this situation is crucial with legal proceedings (including a distraint order notice or a winding up petition) a potential next step for HMRC to take to recover the debt owed.

How to reach out to HMRC regarding a Time to Pay arrangement

If you are unable to pay under a time to pay arrangement it would be wise to contact HMRC immediately and discuss your financial situation and constraints.

Maintaining clear communication is far better than ignoring the problem and allows HMRC to adjust your arrangement accordingly.

The contact number for HMRC time to pay is 0300 200 3822.

If you’ve missed a VAT payment deadline you can initially call the VAT payment helpline on 0300 200 3831.

If you’ve missed a PAYE payment deadline you can initially call the PAYE payment helpline on
0300 200 3810.

HMRC Budget Payment Plan

The budget payment plan (BPP) is different from time to pay and is provided by HMRC to assist self employed businesses in handling their income tax payments.

Essentially using a budget payment plan gives you the ability to consistently make payments before your tax bill is due and regardless of the self assessment payment due dates.

It’s a helpful resource that aids in the management of your tax obligations by making frequent payments instead of in one (or more) lump sum.

To qualify for the budget payment you have to have all of your previous self assessment tax returns submitted and have no outstanding balances.

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