There are times when business owners may find it difficult to pay their tax bill. This can be due to a variety of reasons, whether that be personal circumstances or issues with the company itself. Fortunately, HMRC offers a Time to Pay (TTP) Arrangement for those who require help. Although this arrangement has existed for many years, due to current events, it’s receiving much more attention lately. COVID-19 and the subsequent restrictions put it in place to fight the virus have had a massively detrimental effect on most UK businesses. Therefore, it’s not surprising that more people are looking for help with their tax payments than ever before.
Due to the pandemic and that fact that businesses have been struggling, HMRC have extended their TTP scheme.
How Does it Work?
The Time to Pay arrangement covers all taxes and allows business owners to spread the cost of their tax bill over a number of months. Instead of paying the whole bill in one go, HMRC allows you to make regular monthly payments, which is obviously much more manageable.
When it comes to the arrangement itself, HMRC approaches each individual differently, offering a bespoke solution. Therefore, the time that is given to repay the debt will be dependent on that individual’s income and expenditure. HMRC will calculate how much the person can afford to repay and then work out the time period using this information. There isn’t a one size fits all approach to TTP.
When calculating the specifics of the Arrangement, HMRC will not expect you to pay more than 50% of your disposable income per instalment. It’s also worth noting that the arrangement can cover all of an individual’s outstanding debt, including any penalties or interest.
As each case is different, there is no upper limit to how long the payment scheme can be. However, the majority of business owners are given somewhere up to 12 months to repay their outstanding debt. The arrangement is also flexible and can be amended if circumstances change, for example, a change in income.
What to do
First and foremost, anyone who is worried about not being able to pay their tax bill should contact HMRC as soon as possible. The earlier you open a dialogue, the easier the process will be. It’s also likely that HMRC will be much more amenable to those who are proactive.
Although you can write to and email HMRC, it’s best to call them directly when you’re looking for help paying your bill. Not only is this an immediate solution, it will also allow you to ask questions if you have any concerns about the process. It’s worth noting that HMRC will require certain details before negotiating a Time to Pay arrangement and it’s best to prepare these before calling. These include your Unique Tax Reference Number, information on income and outgoings, bank account details, how much tax you owe and information on the amount you could reasonably pay per month.
Similarly to business taxes, you can also create an agreement with HMRC to spread the cost of your latest self-assessment bill. However, there are certain criteria that have to be met. You must owe less than £30,000, have no other payment plans with HMRC and be up to date with your tax return filings. Furthermore, you must contact HMRC within 60 days after the payment deadline.
Obviously, not everyone will meet these criteria, but there is other help available. If you’re struggling with a self-assessment tax bill and HMRC cannot offer a TTP Arrangement, you need to contact the self-assessment helpline for further assistance.
Taxes can be stressful at the best of times, but the current pressures faced by businesses make the process even more difficult. If you need more information about the Time to Pay scheme, don’t hesitate to contact HMRC or alternatively you could get in touch with an accountant for further help.