The basics of Time to Pay for businesses struggling to pay their taxes

negotiating Time to PayTime to Pay (TTP) is a scheme run by HM Revenue and Customs (HMRC) to help businesses struggling to pay their VAT, PAYE, corporation or other tax bills.

It was first introduced in 2008 after the global financial crisis as a measure to help businesses experiencing cash flow issues as a result of customers extending their invoice payment times.

Not every business is eligible for the scheme and the first step is for a business advisor to thoroughly review the business and to help prepare a realistic forecast that allows for the TTP payments.

This is because HMRC will want evidence that the business can keep to an agreed payment schedule as well as pay all future tax liabilities on time.

Once a business is aware that it cannot pay a tax liability, it ought to contact HMRC early, if only to ask for time to prepare a forecast.

When speaking with HMRC you should be a director and know your VAT or PAYE or 10-digit UTR reference number so they can identify you and your business.

Be prepared to answer questions when applying, including:

* the amount of all HMRC liabilities due and how much you want to reschedule;

* the reasons why you are unable to pay;

* what you’ve done to try to get the money to pay the bill;

* how much you can pay immediately and how long you may need to pay the rest;

* your bank account details.

You are also likely to be asked to give details of income and expenditure, assets, such as savings and investments and what actions you are taking to ensure you will pay future tax liabilities on time.

The level of detail a business will have to provide is dependent on the level of the debt – below £100,000, from £100,000 to £1 million and for more than £1 million.

HMRC will also consider whether the business is one that cannot pay, or one that will not pay. They do this by looking at your history of payments, both in the applying business, personally and other businesses you are involved with.

This guidance is largely based on that given to HMRC officers and is a useful insight into how they assess TTP proposals.

TTP arrangements, once agreed, usually involve making monthly payments by direct debit over a period of less than one year. While payments from a personal credit card have been demanded and taken in the past, they should no longer be demanded from 13 January 2018.

Essentially a TTP should be regarded as a last chance where any late payment of the agreed amounts or of future taxes is a default of the agreement and most likely will result in immediate enforcement by HMRC or a winding-up petition.

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