Introduction »

Giving taxpayers time to pay

Individuals and businesses have to pay their tax on time and HMRC have a legal duty to ensure that this happens. Whilst the vast majority do pay on time HMRC are aware that in the current economic climate many people and businesses are struggling to make ends meet, and this includes paying their tax on time.

HMRC helps individuals and businesses with short term financial difficulties by offering them Time to Pay arrangements using the Business Payment Support Service. HMRC have recently issued a briefing note reminding us about how these arrangements are intended to operate.

The briefing makes reference to the fact that any taxpayer facing difficulty in making a tax payment is potentially eligible to apply, although the vast majority of applicants have been businesses, including the self-employed. Furthermore, the sooner that people contact HMRC the better, as every case is considered on its own merits although some simple conditions need to be met. These include:

• convincing HMRC that an applicant is genuinely unable to pay their tax on time
• ensuring that they will be able to keep up with the tax payments they are offering to make
• the ability to pay other tax bills as they arise.

Up to June 2011 some 440,400 Time to Pay arrangements had been made since its launch involving tax in excess of £7 billion.

It is critical that an agreement is made before any penalties or surcharges become due as HMRC will generally not charge these under such arrangements. However, interest is still charged on outstanding tax.

The briefing comments on recent reports in the press that HMRC have tightened up on Time to Pay arrangements. HMRC state that this is not the case and they continue to apply exactly the same criteria that they have always applied with more than 80% of applicants still being approved. However, they point out that there has been an increase in the proportion of applications who do not meet the criteria as mentioned above. They give an example of businesses which have had a succession of Time to Pay arrangements or which have failed to keep up with the terms of a previous arrangement which might indicate an unviable business rather than a business with short term difficulties.

Time to Pay arrangements therefore can be valuable but are only a temporary bridge for those businesses and individuals with cashflow difficulties.

Please contact us if we can assist you in making such an arrangement or if you require other cashflow advice for your business.

Introduction »