Time to Pay Outstanding Taxes
Introduced by HMRC in 2008 the time to pay scheme enables companies facing difficulties to pay tax, NI and VAT or other due payments by installments.
Any outstanding amounts can be met by agreed stage payments without penalties over a period of a few months but generally no more than a year. This is the scheme the owners of the airline FlyBe turned to in 2020 to assist in financing a rescue of the company.
Tine to Pay Conditions
The time to pay concession only applies to historic debt up to the point that the agreement is made: All further taxes subsequently falling due for payment are required to be paid on time.
HMRC must first be satisfied that your business is unable to pay its taxes and that the inability to pay is temporary. To this end the business will have to demonstrate that it can clear its back taxes by scheduled payments within any agreed period.
It is always best to approach HMRC before the risk of default arises. Although tax penalties are not charged when a time to pay agreement is entered into, interest will be levied on what will have become late payment of taxes.
Rejection of Applications
The time to pay concession is entirely at the discretion of HMRC and what has recently emerged is that if recent dividends were a contributory factor to a cash flow crisis, any application is likely to be rejected.
This is also likely to be the case where overdrawn directors' loan accounts are present in the balance sheet or if there is evidence of inappropriate expenditure such as a recently purchased and expensive car for a director.
Revoking a Time to Pay Agrement
HMRC reserve the right to terminate any time to pay scheme if it subsequently becomes evident that they were misled at the time of the application or if you default on the agreed schedule of payments.
The back taxes could then become due for immediate payment. It should not be forgotten that HMRC is by far the most frequent petitioner for administration and winding up orders.
Once a schedule for payments of instalments has been agreed you must stick to it. It also means that before negotiating an agreement, you will need to accurately calculate your month by month liquidity and cash flow for the year ahead to establish what level of payments on agreed dates the business can sustain, without running the risk of defaulting.
Planning and Forecasting Payments
Figurewizard forecasts enable you can quickly and easily achieve this and a lot more, including forecasting the business's year end balance sheet, profits and taxes as well as the month by month bank balances. Working examples of these can be viewed by selecting "sample forecasts" or following the links below.