HMRC and Time to Pay Arrangements

As either a company or an Individual it can be worrying when you have built up arrears with HMRC, especially when you receive correspondence that they are going to commence proceedings to wind the company up or petition for your bankruptcy.

The Restructuring team have recently successfully assisted a number of clients in negotiating with HMRC and agreeing Time to Pay (TTP) arrangements to settle the liabilities.

Whilst each Time to Pay arrangement is agreed by HMRC on its own right, it is our experience that HMRC will expect the following to be incorporated within the TTP:

• All existing liabilities to HMRC are included (e.g. for a Company that will be VAT, PAYE and Corporation Tax)
• That the arrears are usually paid in full
• The TTP request is supported by realistic cash flow forecasts
• A preference that the arrears are paid in as short a time frame as possible usually within 12 months, albeit, there can be exceptions to this
• Arrears to be paid in equal instalments with the final payment amended to reflect all accrued interest on the arrears; and
• Normally require a direct debit to be implemented

In addition to the above, as part of their agreement to the TTP, HMRC will insist on:

• All future tax returns to be submitted as required and by the usual deadlines; and
• All ongoing liabilities are paid as and when they fall due.

Failure to adhere to the terms of the TTP, would lead to its immediate failure and ultimately to HMRC instigating winding up proceedings. It is important that if a TTP is agreed that the terms of the agreement are met as HMRC is unlikely to consent to a second TTP.

The role of the Restructuring team includes advising clients on what to incorporate into their cash flow forecasts, critical review of cashflow forecasts already prepared, liaison with HMRC, drafting the formal proposals and any negotiating any amendment required in order to reach agreement with HMRC. An important aspect of our role is also to verify the Company or Individual’s current positon.