What Is a Time to Pay (TTP) Arrangement?
If you’re an individual or business owner struggling to repay your outstanding HMRC debts, a Time to Pay (TTP) arrangement could be the answer for you.
TTP arrangements allow companies and individuals to stretch out their repayments, making them more affordable. They typically prevent penalty charges from being added to your tax balance, so long as you keep up with your agreed repayments.
Each TTP plan is unique, tailored to your individual financial situation. The arrangements are flexible and can be amended over time. You can shorten the arrangement if your circumstances improve, or extend it if your available funds decrease.
According to HMRC, over 90% of their Time to Pay arrangements are completed successfully – if you or your business is struggling financially, they’re definitely worth considering.
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Who Can Get a Time to Pay Arrangement?
Anyone who is behind on their HMRC payments may be able to qualify for a TTP arrangement. To be eligible, HMRC must be satisfied that:
- You are not able to repay your debts on time without a TTP arrangement
- You will be able to keep up with your TTP payments
HMRC will offer a TTP to anyone who is willing to repay their tax debt, but is unable to at the present moment – if you simply have money that you would rather spend elsewhere, meaning that you would like to defer payment, HMRC will reject your application.
Which Debts Can Be Included in a Time to Pay Arrangement?
A TTP arrangement can include any owings to HMRC, including:
- Tax
- Duty
- Penalties
- Surcharges
How Are Time to Pay Arrangements Calculated?
The answer to this question varies slightly based on whether you’re struggling with personal taxes or business taxes.
Individual Tax Debt
- Employment details (including either your employer’s PAYE registration number)
- If you rent or own your home
- Details of your assets
- Information about your investments
- Whether you have other creditors (and what you owe them)
This information will be used to figure out your monthly disposable income, factoring in all of your essential living costs. The repayment amount will be based on this disposable income – HMRC typically asks for around 50%.
If you don’t have enough disposable income, HMRC will pause their collection efforts until your circumstances improve.
Company Tax Debt
HMRC will ask you what you think your company can afford to repay; they’ll review your proposal and then ask questions to ensure the TTP strikes a balance between affordability and speedy repayment.
The arrangement will be regularly reviewed – this allows it to be adjusted if the businesses’ finances change. While this means you won’t be able to keep payments smaller should your finances improve, it also ensures that the arrangement won’t push your business over the brink. Generally, these agreements don’t last for more than a year.
HMRC must believe in the viability of your business and the trustworthiness of your character to go ahead. If they think your business is going to fail, or if you have a poor track record in your dealings with HMRC, they’ll probably reject your offer.
What Happens to My Assets in a Time to Pay Arrangement?
A Time to Pay arrangement does take your assets into account – this could include your savings, investments, and property.
Generally, HMRC will expect you to use these assets to reduce your debt before they’ll be willing to agree to a Time to Pay Arrangement.
Individual Assets
If you have excess assets – such as a second home or multiple vehicles – HMRC will probably want you to use them towards the repayment of your debts. You might have to release some of the equity in your property or sell any non-essential assets.
HMRC won’t expect you to sell your family home, although they may want you to release some equity. However, if you’re unable to enter into a Time to Pay arrangement, or pay by any other means, HMRC may place a charging order against your property – in rare cases, this could result in you being forced to sell your home.
Company Assets
HMRC will expect you to put assets that aren’t essential to the running of the business towards the repayment of your tax debts. These assets could include:
- Stock
- Equipment
- Property
- Vehicles
- Shares
You could also be expected to extend your other lines of credit, take out business loans, or contribute with your personal funds.
Once your business has made these contributions, HMRC will consider entering into a TTP arrangement.
What Happens if I Miss a Payment?
If you miss a TTP instalment, HMRC will get in touch with you to ask why you’ve missed the payment. They’ll want to renegotiate the terms of your TTP arrangement, adjusting the size of your repayments so that they’re still affordable for you.
If the terms of your TTP can’t be renegotiated, or if you refuse to cooperate, HMRC could resort to using their debt collection powers – this may result in them getting a County Court Judgement made against you, which could result in visits from bailiffs or charging orders.
You should always try to renegotiate with HMRC. Debt collection may result in the loss of your belongings or even your home. Try to keep in mind that HMRC will only ever use these powers as a last resort.
What if I Can’t Enter into a Time to Pay Arrangement?
If HMRC won’t allow you to enter into a TTP arrangement (or if you can’t repay), you should consider formal insolvency procedures. There are various solutions to accommodate individuals and business owners in different situations.
Individual Insolvency Solutions
Individual Voluntary Arrangement (IVA)
An Individual Voluntary Arrangement is a kind of repayment plan which stretches out your debts over the course of 5 years, allowing you to slowly work off your debts. They include all of your debts, including those to HMRC:
- Freezes debts
- Prevents debt recovery actions
- Protects your assets
You’ll need the backing of 75% of your creditors to enter into an IVA. If you’re successful, you will be safe from any debt collection efforts so long as you keep up with your instalments. At the end of the 5 years, any remaining debts will be written off.
Bankruptcy
Although it’s got a lot of stigma attached to it, bankruptcy can be one of the best ways to get back to a debt-free life:
- Writes off debts after 12 months
- Prevents creditors from contacting you
- Stops further legal action
Bankruptcy will require you to surrender your valuable assets but in some cases, it can be cheaper in the long run. Your debts are cut off at the source, rather than trying to pay them and eventually being forced into bankruptcy anyway.
Company Insolvency Solutions
Creditors’ Voluntary Liquidation (CVL)
If your business is insolvent, a Creditors’ Voluntary Liquidation may be the answer for you. As the most common form of company closure in the UK, it offers a range of benefits:
- Safeguards you from legal action
- Helps to protect your personal finances
- Cost of procedure typically covered by the liquidation
Your company’s assets will be sold for the benefit of your creditors, including HMRC. Any remaining debts are then written off, allowing you to focus on your next venture.
Get Free Advice Today
If you’re struggling with HMRC debts, you should get in touch with an insolvency practitioner as soon as possible.
Our team can assess your situation and let you know your best course of action: inaction can allow debts to spiral out of control and – in the case of business owners – could put you at risk of misfeasance, wrongful trading, or fraudulent trading accusations.
Get in touch today to book a free consultation.
FAQs
Unfortunately, yes – TTP arrangements will generate interest from start to finish. The payable interest will be included in the overall debt included by the arrangement.
HMRC are legally bound to honour the terms of a TTP arrangement, although they do have the right to withdraw if your circumstances significantly change. So long as you’re honest with HMRC about your situation, you shouldn’t have to worry about termination.
