What are Time to Pay Agreements?
For many years Her Majesty's Revenue and Customs ("HMRC") have been prepared to enter into Time to Pay Agreements ("TTPA") with taxpayers to help them structure tax payments outside of the strict statutory framework. A TTPA is, in effect, a debt repayment plan which could prove a useful lifeline for both businesses and individuals. Entering into a TTPA will relieve taxpayers of late payment penalties, although late payment interest is still chargeable. Although the Government have made certain commitments and introduced measures to ease the tax and financial burden on businesses and individuals during the COVID-19 pandemic these will not cover all circumstances. Measures to date include:
- The Self Employment Income Support Scheme;
- The Coronavirus Job Retention Scheme;
- The Coronavirus Business Interruption Loan Scheme, and
- The deferral of VAT payments.
What do TTPAs cover?
TTPAs can be considered in relation to Corporation Tax, VAT, Income Tax, PAYE and NIC. Typically TTPA's can last for 6 to 12 months although longer periods can be agreed with HMRC depending on an assessment of the taxpayer's ability to meet the commitments they agree upon.
Factors to bear in mind
- TTPAs should be requested in advance of payment deadlines;
- Preparation is key. Applicants should set out their desired deferral timeframe and demonstrate the constraints on their ability to discharge their tax liability;
- The taxpayer's other liabilities and their financing arrangements will need to be explained;
- Both individuals and businesses should be prepared to demonstrate their cash flow and assets/liabilities and explain the commercial rationale for requesting a payment deferral;
- In order to obtain the benefit of a deferral, the filing of returns and payment of past liabilities needs to be up to date;
- Taxpayers should remember that their tax liabilities are not being written off - a TTPA is a deferral of payment.
- The longer the deferral period requested, the higher the level of evidence that HMRC will require;
- Agreements may be contingent on the taxpayer's commitment to use future income or asset sales to meet their liability.
What do taxpayers need to do to arrange a TTPA?
HMRC have set up a helpline to deal with COVID-19 related TTPAs but any proposal should preferably be in writing backed by supporting evidence.
For more information please contact Paul Noble.