The first step is to provide the taxpayer with clear information as to what tax must be paid by which date, and the consequences of not paying on time: interest and penalties. Some taxes carry higher penalties for late payment – for example a VAT surcharge of up to 15% of the late tax can be imposed even if the payment is only one day late.
To avoid penalties for late payment the taxpayer needs to either pay the tax by the trigger date for penalties, or agree a time to pay (TTP) arrangement with HMRC. Any type of tax can be subject to a TTP arrangement; these agreements are not limited to business taxes. For example, if the taxpayer can’t pay CGT due as the proceeds from the sale have not been paid, HMRC may well agree a TTP. However, in all cases interest will accrue from the due date.
Before contacting HMRC the taxpayer needs to have proof to hand that he can’t pay the tax immediately, such as available credit limits. All the relevant tax returns should also be submitted. In dire circumstances, such as serious illness, or a destruction of the records by fire or flood, HMRC will agree a temporary arrangement pending the submission of the return.
All TTP arrangements are agreed by HMRC’s debt management department, who are not known for their forgiving natures. They will use a risk based approach when deciding whether to grant a TTP. The taxpayer’s previous payment history will be considered, as well as the size of the debt.
To request a TTP arrangement the taxpayer should call HMRC on: 0300 200 3835. There is an agent dedicated line for debt management issues:0300 200 3887, but the taxpayer will ned to speak directly to HMRC to set up direct debit to pay the tax by instalments. If any direct debit payment fails the TTP is automatically cancelled, and enforcement action may be taken.
Written by the Tax Advice Network