Many companies that are experiencing financial difficulties or cashflow problems owe money to HMRC. It is often the first thing directors fall behind with and it quickly snowballs out of control.

HMRC actively chase outstanding debts and it will not take long for them to begin taking further action against a company, including County Court Judgements, instructing Bailiffs and petitioning for the Winding Up of the company.

In order to try and avoid these serious repercussions a company may be able to negotiate an agreement with HMRC whereby they can pay the debt off over a period of time in affordable monthly repayments. These arrangements are known as Time to Pay Arrangements (TTPA).

A TTPA with HMRC will usually last between 6-12 months and involve you paying them a set amount per month, for the full period, in order to pay off the debt in full. HMRC are unlikely to come to an agreement with you if you have a poor history with them or previous failed TTPA’s. However, if you have a good history with them it can be the best way to deal with the arrears and get the debts paid off.

What do I need to do?
Before contacting HMRC you should first consider what you can afford to offer as part of the TTPA. As HMRC are very strict on any missed payments it is important that what you offer/agree is affordable.

Usually it is best to make first contact by telephone, but they may wish you to follow this up in writing, outlining your offer/proposal.

TTPA’s are designed for temporarily distressed companies with short-term issues, therefore you should also be aware that HMRC may also wish to discuss the viability of your company, your affordability with regards to repayments and what will happen if you do not meet the repayments.

Advantages of a TTPA

  • Allows the company to continue to trade
  • Gives the company time to pay the debt with affordable monthly repayments
  • As this is an informal agreement between you and HMRC it is not publicly visible and therefore does not affect the company’s credit rating

Disadvantages of a TTPA

  • As this is an informal agreement HMRC do have the right to withdraw the agreement if,
    • You miss a payment
    • Your situation changes effecting your affordability
    • You have misled or falsified HMRC in any way during the application process
  • HMRC are unlikely to agree if you have any previous bad history with them
  • HMRC are unlikely to allow an agreement to run for more than 12 months, therefore if your debt to them is relatively high, your monthly repayments will, in turn, need to be quite high