The HMRC Time to Pay initiative (TTP) was introduced in November 2008. It was designed to help companies survive the recession. The scheme allows companies time to pay tax debts which are in arrears.
- What is HMRC Time To Pay?
- How long does a payment agreement last?
- Potential problems with TTP Scheme
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What is HMRC Time To Pay?
The Time To Pay scheme provides a standard mechanism for allowing companies time to pay tax arrears. The scheme can be used to agree payment plans for PAYE, VAT and Corporation Tax. It is administered by a dedicated team based in Glasgow.
A request for time to pay will not be automatically accepted. It must be supported by a business plan and cash flow forecast. This must show the company has sufficient resources to maintain both ongoing HMRC debts and pay its arrears.
If a reasonable cash flow forecast cannot be produced an agreement is unlikely to be made. HMRC will then question whether the company should be allowed to continue trading.
How long does a Time To Pay agreement last?
HMRCs preference is always for arrears to be repaid over three months. However they are normally prepared to agree repayment over 12 months. Such a request must be backed up with a sensible business plan.
The TTP team also have the power to agree longer payment terms in exceptional circumstances.
The agreement will normally involve regular monthly payments but can include payments from asset disposals, debt collection and fund raising. Proposals must also provide evidence of attempts to refinance assets and raise funds to accelerate the payments.
What are the problems with Time To Pay?
The main problem with the Time To Pay scheme is that a company can be put under pressure to repay outstanding tax debts more quickly than is possible. This is particularly the case if the company is unable to repay its debt within 12 months.
It is easy for company directors to feel under pressure to agree an unrealistic payment plan which will ultimately result in failure. If a company fails to maintain the agreement it will normally lead to HMRC issuing a winding up petition against the company.
If you feel your company will be unable to repay HMRC arrears within 12 months you should consider a Company Voluntary Arrangement (CVA). This will allow more time for debt repayment. Alternatively Pre Pack Liquidation might be suitable of the company cannot make any payments towards its debts.