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COVID-19: Can HMRC’s Time To Pay service help?

David Gregory David Gregory

If your business is facing liquidity difficulties as a result of coronavirus (COVID-19), agreeing an HMRC Time To Pay (TTP) plan for your tax liabilities may be an option, David Gregory explains.

The government has set up a new call centre with 2,000 HMRC staff to support businesses and self-employed individuals concerned about not being able to pay their tax on time due to the coronavirus outbreak. The helpline staff are available to assist with the anticipated increase in requests to agree an alternative schedule for paying outstanding tax liabilities or the postponement of proceedings for debt collection. In addition, interest or penalties for late payment of tax may be waived for businesses that experience administrative difficulties in contacting HMRC or paying outstanding tax liabilities immediately.

The HMRC Time To Pay phone number: 0800 024 1222

How the situation will play out over the next 12-18 months is uncertain, but our experience is that, in the early stages of severe financial disruption (as we saw during the 2008 banking crisis), HMRC is likely to relax the usual requirements of a Time To Pay application and may be more lenient when it comes to initial requests. However, it is still very important for businesses to consider whether a TTP is an appropriate option and there are several factors that should be taken into account. These include:

Thinking about your business’ long-term position

While considering the future is challenging in these uncertain times, where do you expect the business to be in three, six and 12 months’ time, based on the scenarios you are evaluating? Is a TTP essential now, or is it likely that one may be more critical further down the line?

Can you make multiple requests?

Even if HMRC takes a more-lenient approach, it is currently unclear what its attitude will be to multiple Time To Pay requests. Therefore, future cash flow prospects should be assessed carefully, including the extent to which further TTP support may be necessary. At some point, HMRC will feel that the wider economic position has eased and tighten the conditions for TTP arrangements. Businesses should be wary of tax deferment having become part of the normal business cycle.

Is a Time To Pay the right solution?

Could one of the other support measures announced by the government be more suitable at this time, eg, the business interruption loan scheme or Bank of England-backed scheme? Is there an underlying issue outside the current crisis that needs to be addressed to secure the business’ long-term future?

What taxes should be included in a Time To Pay plan?

The normal criteria for a Time To Pay agreement is that the other tax liabilities must be paid on time as they fall due, so all relevant debts should be included to minimise the risk of the agreement not being fulfilled. While HMRC will consider the deferral of tax that is due in the short term (ie, in the coming weeks), it is unlikely to defer tax debts that are anticipated further ahead in the coming months, which may also force businesses towards the uncertainty of multiple applications

What impact will it have on the business if the Time To Pay plan is rejected?

Our initial insight is that there is inconsistency within HMRC as to how TTPs are being agreed. Some going through on a light touch and others being more heavily scrutinised.

Finally, it is important to remember that TTP is only one of a number of strategies that should be considered by businesses facing liquidity challenges. While the position remains fluid and uncertain, businesses should carefully consider the longer term implications of seeking assistance under the Time To Pay service and revisit their approach on a regular basis.

For further information about TTP or to arrange support, get in touch.

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