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Published on 7 January 2011by Tony Groom

HMRC’s Assessment Criteria for a Time to Pay Arrangement for Revenue Arrears

As businesses face continued tough trading conditions in 2011 a new series of

guidelines has appeared on the HM Customs and Revenue (HMRC) website on the

arrangements for paying arrears of tax, VAT and PAYE, known as Time to Pay (TTP).

Although the guidelines are aimed at those working in the revenue service they are

equally useful for businesses in difficulties, for turnaround and rescue advisers and for

insolvency practitioners in outlining the questions and conditions businesses will need

to be prepared for if they are in arrears with revenue payments and looking for a

manageable way to spread the repayments.

The first point to recognise is that in all cases the repayment period to be set will be

as short as possible and usually no more than a year. Repayment arrangements of

more than a year will only be permitted in what are called “exceptional

circumstances”. However long the arrangement, interest will be charged while the

debt remains outstanding.

There is no entitlement for a business to be granted a TTP. HMRC officers must

consider the timescale being requested by the “customer”, their previous payment

history and the amount outstanding. The underlying consideration is that the longer

the time period of non-payment has been and the higher the amount, the greater

the risk to HMRC. Therefore an application is more likely to be viewed favourably if

the request for a TTP is made before the due date for payment.

There are two further conditions that must be met for a business to have a chance of

achieving a TTP and they are that the applicant must have the means to make the

agreed payments as well as the means to pay other tax liabilities that become due

during the TTP period.

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Call Tony Groom on 0844 8040 540

The amount of detailed information that will be requested from the applicant will

vary according to the level of the debt, divided into three categories, for debts

below £100,000, from £100,000 to £1 million and for more than £1 million.

However, whatever the level of arrears, for a successful TTP to be achieved any

business in difficulty is strongly advised to be honest with itself and its advisers about

all its outstanding debts and liabilities if it is to be able to stick to any TTP

arrangement.

This is because, although HMRC is bound by any TTP arrangement agreed, it can

withdraw from the arrangement if it discovers that the applicant has been

misleading or untruthful, if they default on the arrangement or fail to satisfy any TTP

conditions or if any other reason comes to light where it becomes apparent that tax

is at risk.

When proposing a TTP arrangement, the applicant must reconcile the tension

between HMRC’s approval criteria and in particular their desire for a short term

arrangement and the company’s ability to keep to the agreed monthly payments,

and in particular avoiding default terms such as paying future obligations on time.

Therefore, when considering a request for a TTP arrangement, HMRC officers are

required to consider whether the applicant falls into the “can’t pay” or the “won’t

pay” categories. Again, the applicant’s credibility is under scrutiny and the

judgement is likely to depend on the experience of the HMRC case officer as well as

the details of the information provided. If, in the case officer’s judgement the

applicant cannot realistically pay off the arrears then a TTP will not be allowed.

Finally, the guidelines make it clear that the preferred method of dealing with TTP

requests is by telephone, because it allows for detailed questioning of the viability of

the business, and therefore whether the proposed TTP will have a chance of

succeeding, as part of the assessment of whether the situation is a “can’t” or a

“won’t” pay.

It is crucial, therefore, that before the telephone conversation that applicant has all

the required information on income and expenditure prepared and ready with the

help of a rescue adviser or insolvency practitioner so that they can remain calm

throughout what can be a stressful situation.

We are not Insolvency Practitioners. We operate within the law to protect our clients and their wealth. Our team has worked for over 20 years to help stabilise and return hundreds of businesses to profitable growth. Once appointed, Insolvency Practitioners do not work for you, they work for creditors and use your company’s assets to pay themselves. We work for you, not creditors.

K2 Business Rescue The Emergency Service for Business

Call Tony Groom on 0844 8040 540

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