The current COVID-19 pandemic has resulted in extreme cashflow pressures for a substantial number of businesses, with many looking to delay paying different types of tax liabilities to HMRC.
Payments can typically be deferred for three months (currently until June 30th) although that situation may change in the future. Such deferment covers all taxes including: PAYE, NIC, VAT and Corporation Tax.
It is important that if you believe you will not be able to pay a liability, you contact HMRC before the liability becomes due.
If after three months the business is still unable to pay, they can apply for a more formal Time to Pay (TTP) arrangement. Please bear in mind that HMRC expects these to be exceptional, although that will clearly depend on many circumstances. Where such an arrangement is entered into, it is likely that no additional penalties will be levied, however, this yet to be confirmed.
Interest accrues from the original due date to the end of the TTP arrangement – The interest payable will be included in the overall debt covered by the arrangement.
Criteria for a TTP arrangement
HMRC will consider each request on a case-by-case basis.
They have advised that in the current situation they will take a more ‘relaxed’ approach, that’s what they have done in the past. However, they will still require the company to have explored (or to be exploring) other options for financing such as bank loans, shareholders and other group companies.
HMRC recommends that the business communicates with them as soon as they become aware that they cannot meet the liability. This is likely to be a couple of days or weeks at the most as any longer would be viewed as speculation.
Contacting HMRC and what you can expect
- To contact HMRC using their dedicated helplines: 0800 015 9559 or 0300 200 3840.
- HMRC appear to be agreeing to deferrals quite readily and agreeing payment schedule periods.
- HMRC will ask why you are applying so be prepared to say why, e.g. cashflow.
You will be asked to provide detailed information in respect of the following:
- The heads of duty involved (PAYE/NIC, CT etc.)
- The amounts for each duty
- The due date for each duty
- The tax references and entity names for each duty type and amount
- The specific request – is it a deferral or time to pay?
- The reason why the business cannot pay
- A timeline for when the customer believes they will be able to pay
- In respect of deferral, the length of the proposed deferral
HMRC’s questions will become more onerous in time e.g. what action has been taken to obtain funds from elsewhere, provide cash flow forecasts to show when you need cash injections and the actions you are taking to reduce/defer your outgoings, etc.
It is very important to have a dialogue with HMRC aimed at keeping them informed such that, if/when a deferral becomes necessary, it can be accessed as quickly and painlessly as possible.