Avoid bailiffs, statutory demands, bankruptcy and winding up petitions with HMRC Time to Pay.
HMRC debts, including VAT arrears and PAYE arrears, can arise when there are cashflow problems.
The best option when faced with VAT or PAYE arrears is to enter a HMRC Time to Pay Arrangement. This option ensures that you do not incur additional penalties and interest, whilst waiting for HMRC to catch up with you. You will also need to make sure that the Time To Pay proposal is realistic and achievable, whilst meeting the criteria set down by HMRC.
Things you may not know about an HMRC Time to Pay Arrangement
HMRC have publicised guidelines on how businesses with cashflow problems can agree Time to Pay (TTP) arrangements, but sometimes a little extra knowledge acquired through having dealt with many successful cases on behalf of clients can help get the HMRC Time To Pay arrangement in place.
As an example, it is often thought that if a HMRC Time To Pay arrangement is in place but further arrears arise and the business has defaulted on the terms of the agreement, then there can be no second chance. Whilst it can be difficult to revise an agreement with new arrears, we have had some success.
If despite your best efforts, there is a risk of new arrears through unforeseen circumstances, which makes the original proposal unworkable, help is still at hand. My colleague, Steve Godwin, had two recent successes where the clients had assumed an insolvency process was the inevitable outcome.
One client had a statutory demand and faced bankruptcy, and another client company was threatened with a winding up petition. The liabilities were £430k and £130k respectively.
The blueprint for achieving an HMRC Time to Pay Arrangement was similar in both cases.
Here are some of our tips for success with a HMRC Time to Pay Arrangement:
Establish clear lines of communication with HMRC straight away.
Explain why the original plan has failed and what is different this time. Obviously credibility is an important issue in the eyes of HMRC, and in these two examples having a good industry reputation and track record helped persuade HMRC to accept the revised agreement.
Outline the essence of the repayment plan and agree timescales along with information and documentation required to support the proposal.
Remember that the officer of HMRC has a job to do and although you may think it is simply all about the commerciality of the proposal and paying back tax to the government, they have other criteria to consider.
The timescales for repayment of the tax have to be realistic and affordable, but at the same time there are timescales beyond which HMRC are unlikely to go without exceptional circumstances.
A significant down payment at an early stage of the repayment plan demonstrates commitment and intent to fulfil the repayment proposal.
Do what you say you will and ensure that you provide the information requested in the agreed timescale. Be ‘up front and honest’.
For more information on HMRC Time To Pay, view our relevant pages: