Tips for agreeing deferred tax payments with HMRC

We wish to do everything we can to help you get through this financially challenging period, including assisting you in negotiating ‘time to pay arrangements’. Such arrangements allow HMRC to formally agree to delayed payment of tax. The Institute of Chartered Accountants of England and Wales has provided the following useful tips for anyone preparing to call the COVID-19 helpline and entering negotiations with HMRC:

When to make contact: The first step is to file the return that will create the liability on HMRC’s systems. Generally, it is only possible to make the arrangement after the liability has become due for payment. However, in certain cases we will recommend establishing dialogue with HMRC prior to the liability due date.

Individuals with an historic income tax debt of less than £10,000 may be able to set up a time to pay arrangement online, using their personal tax account, which could avoid lengthy telephone queuing.

Cash flow forecasts and budgets: Before phoning HMRC it is advisable to have financial forecasts and a statement of assets and liabilities available. HMRC will expect the taxpayer to make the best offer they can and will not usually make suggestions about the amount it will accept as a regular payment.

HMRC staff authority to agree time to pay: HMRC will usually expect to set up a regular monthly payment plan with collection by direct debit. Most HMRC debt management contact centre staff have authority to agree time to pay over a period of up to 12 months. Longer periods can be arranged but usually need to be escalated to more senior HMRC staff. We understand that debts of more than £100,000 may have to be referred internally within HMRC. Short suspensions of collection to allow the taxpayer to take a specific action which would enable them to pay are sometimes possible.

Expect robust questioning: We don’t know to what extent HMRC staff will be more sympathetic to requests for time to pay in the current environment but in normal circumstances negotiating time to pay can involve what feels like personal and intrusive questioning. It is important to make HMRC aware of all information which might be relevant to the payment difficulties, as calmly and professionally as is possible in what may well be extremely difficult circumstances.

No agreement may be better than an unaffordable agreement: It is often better to conclude a phone call to HMRC having failed to reach an agreement than to agree to an arrangement which the business can’t afford. If a time to pay agreement is not kept to it is difficult to get HMRC to re-establish it and HMRC will be more reluctant to make agreements in the future. If circumstances change it is advisable to contact HMRC, before missing any payments, to renegotiate the arrangement. If a formal time to pay arrangement cannot be reached it is usually advisable for the taxpayer to pay what they can, when they can as this shows willingness to pay and may delay further enforcement action by HMRC (this approach may not be appropriate if insolvency is likely and further advice should be sought in this situation).

Future tax liabilities: A standard term of HMRC time to pay agreements is that future tax liabilities are paid in full as they fall due. Where this is not possible it is necessary to contact HMRC again to renegotiate the arrangement to include the new debt. HMRC is often reluctant to agreed repeated requests for time to pay but may be more amenable in the current situation.

Which debts to prioritise: HMRC is usually more willing to consider agreeing time to pay for profits-based taxes such as income tax and corporation tax than for taxes such as VAT and employees’ PAYE and national insurance contributions, which businesses are effectively collecting on behalf of the Exchequer. The usual advice is to prioritise paying VAT and employer liabilities as HMRC pursues these more actively. We don’t yet know whether this will change in the current situation; there has been some speculation that the Government may be minded to focus assistance on VAT and employer liabilities, but no announcement has been made.

Late payment penalties: An advantage of a formal time to pay arrangement is that late payment penalties will not be charged if the arrangement is in place at the trigger date for the penalties. We don’t yet know whether HMRC will be more willing to waive late payment penalties in the current situation but the helpline page suggests that the cancellation of penalties will at least be explored. 

Interest: In normal circumstances HMRC does not waive interest unless the delay in making payment is somehow directly attributable to HMRC. We don’t yet know whether HMRC will be more willing to waive interest in the current situation but the helpline page suggests that the cancelling of interest will at least be explored. 

Alternative ways to contact HMRC: As well as the COVID-19 helpline HMRC has regular payment helplines. Large businesses with a customer compliance manager should contact that individual. If the debt is a result of a compliance check, any anticipated difficulty with making payment should be discussed with the compliance officer, ideally before reaching final settlement.

Please do not hesitate to contact us to discuss your ability to pay forthcoming tax liabilities; we can help you to assess the information which you will need, such as cash flow forecasts and budgets, before approaching HMRC to make a time to pay arrangement.

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