A Time to Pay arrangement is an agreement with HMRC to pay tax debts in instalments, rather than in one lump sum. This scheme covers most types of tax debts, including:
- Corporation Tax
- PAYE
- Self Assessment
- VAT
You will make monthly payments via Direct Debit. While the standard term is 6 to 12 months, longer arrangements may be available in exceptional cases and usually require managerial approval. However, interest will accrue on any unpaid amounts.
Who Can Apply for a Time to Pay Arrangement?
Time to Pay eligibility is assessed on a case-by-case basis. HMRC will have to consider your case before approving a payment plan, so you must demonstrate that financial difficulties are preventing you from paying them in full and on time.
For Self Assessment debts under £30,000, online applications are available if you are within 60 days of the payment deadline. However, for other tax debts such as VAT and PAYE, online applications are not always available, and HMRC may require direct contact.
HMRC is more likely to approve taxpayers with up-to-date filings and a history of compliance. HMRC expects a realistic and sustainable proposal for repaying the debt.
How to Apply for a Time to Pay Arrangement
Applying for a Time to Pay arrangement can vary depending on your circumstances.
If your Self Assessment debt is less than £30,000 and you are within 60 days of the payment deadline, you can apply online through HMRC’s portal. This process is quick and does not require speaking to an advisor.
For debts exceeding the online thresholds or for taxes like Corporation Tax or VAT, you will need to call HMRC’s helpline. You will discuss:
- The amount you owe and why you cannot pay.
- Your financial situation; including income, expenses and assets.
- How much you can afford to pay immediately and in instalments.
Consequently, HMRC will use this information to determine whether a Time to Pay arrangement is appropriate and sustainable.
After Approval
Once approved, HMRC will set up a Direct Debit for monthly payments. To maintain the arrangement:
- You must pay on time, as missing a payment could result in the cancellation of the plan and potential enforcement action.
- You must inform HMRC immediately if your financial situation improves or worsens. They may adjust your plan accordingly.
- You must stay on top of new obligations, as Time to Pay only covers existing debts not future ones.
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