Time to Pay Arrangements

As insolvency practitioners, we regularly speak with the directors of financially distressed businesses. Typically, these businesses are facing cashflow problems in the very short term, and in most situations HMRC is a significant creditor. One of the most effective tools at a company’s disposal to help regain stability is the Time to Pay arrangement (TTP).

What is a TTP arrangement?

A TTP is a formal agreement between a company and HMRC that allows a business to repay its outstanding tax liabilities in regular instalments, rather than as a lump sum. An arrangement can include VAT, PAYE and Corporation Tax and usually lasts six months or less, though occasionally HMRC will allow an arrangement of up to 24 months. The primary goal is to provide breathing space for businesses facing temporary cash flow issues, enabling them to continue to trade whilst gradually servicing their historic HMRC debt.

Further considerations

Any business can apply for a TTP, and HMRC has not published an explicit criterion for acceptance. In our experience, HMRC will consider the following before agreeing to a TTP:

• Payment record – generally, HMRC will not support an application from a company that has a history of defaulting on its tax liabilities.
• Communications – HMRC appreciates an open and honest dialogue and applications are more likely to be successful when HMRC is informed in advance of a cash flow deficiency and provided with a compelling explanation of why a TTP is required, the steps taken and reasoning for future growth forecasts.
• Evidence provided – companies should provide HMRC with the financial information necessary for it to decide. This is likely to include a profit and loss account, a balance sheet and a cash flow forecast.

Essentially, directors should be able to convince HMRC that there is a compelling reason to accept the proposed TTP.

Challenges

Whilst TTPs offer significant benefits, they are not without challenges. Businesses must ensure they can adhere to the agreed payment schedule. Failure to do so can lead to penalties and potentially, more severe actions from HMRC. Additionally, securing a TTP requires transparent and honest communication with HMRC, as well as a demonstrable commitment to resolving the underlying financial issues.

Application process

The process begins with a thorough assessment of the company’s financial situation. In the first instance, communication with HMRC will usually be through its telephone help line. HMRC will usually requires a business to provide a repayment plan and we, as insolvency practitioners, work closely with companies to prepare a realistic payment proposal to HMRC.

In our experience, our work is likely to include:

• A detailed financial review – including analysis of the company’s cash flow and future revenue projections.
• Liaising with HMRC – including presenting the proposal to HMRC and demonstrating the company’s commitment to future repayments.
• Negotiating with HMRC.

Contact us

Please do not hesitate to contact me or another member of the restructuring and corporate insolvency team if you would like any further information or to discuss the options available to you. We are happy to help.