HMRC liabilities and Time To Pay arrangements

HMRC letters and money

15th January 2024

The increase in interest rates and energy bills during 2023 has had a significant impact on cashflow which is making it harder for some taxpayers to settle their liabilities. With this in mind, we took a look at HMRC’s annual report and 2022/23 accounts, which show the increasing need for temporary support of the settlement of tax debts by way of Time to Pay (TTP) arrangements.

At the end of 2022/23, there were around 912,000 TTP arrangements in place, which had increased by around 69,000 compared to the year before. TTPs were in place for some £5.7bn compared to £5.4bn in the previous year.

For taxpayers who cannot pay their HMRC liabilities on time, HMRC may agree to a Time To Pay (TTP) arrangement.

What is a TTP arrangement?

A TTP will allow taxpayers to pay an HMRC tax liability over a period of time – in practice this ranges from six to twelve months. In most cases, the TTP arrangement will consist of regular monthly payments paid by direct debit.

When considering a TTP arrangement, the following should be taken into consideration:

  • Whether all other avenues to raise finance to settle the liability have been explored.
  • Only one TTP arrangement can be in place at any given time and this must incorporate all tax debts.
  • Interest will be charged from the original due date of the liability until the liability has been settled in full.
  • A TTP arrangement will be withdrawn and enforcement proceedings will commence if:
    • The agreed payments are not paid on time
    • Future returns are not filed on time.
    • Future liabilities are not paid on time

Applying for TTP

A TTP arrangement can be set up by the taxpayer through their HMRC online government gateway account.

Self-assessment

The taxpayer can set up a TTP arrangement online if:

  • Tax returns are filed and up to date
  • The liability is less than £30,000
  • There are no other HMRC payment plans or tax debts
  • It is less than 60 days after the payment deadline

PAYE

A taxpayer can set up a payment plan online if they have:

  • Missed the deadline to pay an employer PAYE bill
  • Owe less than £50,000
  • Plan to pay off the debt within 12 months
  • Have debts less than five years old
  • Have no other payment plans or debts with HMRC
  • You have sent any employers’ PAYE submissions and Construction Industry Scheme (CIS) returns that are due

VAT

A taxpayer can only set up TTP online if they have:

  • Missed the deadline to pay a VAT bill
  • Owe less than £50,000
  • Plan to pay within 12 months
  • Have debt for an accounting period that started in 2023 or later
  • Have filed all your tax returns

A taxpayer cannot set up a VAT payment plan online if using the Cash Accounting Scheme or Annual Accounting Scheme, or make payments on account.

For more information, HMRC’s guidance can be found here.

TTP arrangements which cannot be set up online

For Corporation Tax liabilities, any liabilities consisting of more than one type of tax, and for liabilities exceeding the online limits outlined above, the taxpayer will need to call HMRC to agree a TTP arrangement.

We recommend contacting HMRC before the liability becomes due. It is worth noting that, although interest will continue to be charged, surcharges will not apply if a TTP arrangement has been formally agreed with HMRC before the liability becomes due for payment.

If you require assistance agreeing a TTP arrangement with HMRC, our Tax Disputes & Resolutions team has a wealth of experience to help guide you through the process. This includes gathering the necessary information to understand your specific circumstances, the information HMRC will require to set up a TTP, how long the TTP could be in place for, calling HMRC with you (over the phone or in person) and agreeing the TTP. To see how we can help, contact Danielle Ford, Partner and Head of Tax Disputes & Resolutions.

Danielle Ford

Partner, Head of Tax Disputes & Resolutions
+44 20 7969 5591
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