Businesses and self-employed people in financial difficulties who have outstanding tax liabilities may be eligible to receive support with their tax affairs through HMRC’s Time To Pay Agreement. Time to Pay Agreement is used for arrears of corporation tax, income tax and PAYE, but it can also be used by businesses and individuals who anticipate that they may have difficulties paying their future tax bill.

You can set up a payment plan online if you owe tax from self-assessment and employer’s PAYE contributions. The rules differ for both.

You can set up an online payment plan for tax owed through self-assessment if you:

• have filed your latest tax return
• owe less than £30,000
• are within 60 days of the payment deadline
• plan to pay your debt off within the next 12 months
• do not have any other payment plans or debts with HMRC

You can set up an online payment plan for employer’s PAYE contributions if you:

• owe less than £15,000
• are within 35 days of the payment deadline
• plan to pay your debt off within the next 6 months
• do not have any other payment plans or debts with HMRC
• have submitted any employers’ PAYE submissions and Construction Industry Scheme (CIS) returns that are due

Taxpayers that qualify for a Time to Pay arrangement using the self-serve Time to Pay facility online can do so without speaking to an HMRC adviser. The service will create a bespoke monthly payment plan based on how much tax is owed and the length of time needed to pay. Over 142,000 taxpayers used the service for the 2021-22 tax year to spread the cost of over £475m in tax.

For corporation tax, VAT or taxpayers that do not meet the above requirements need to contact HMRC to request a Time To Pay arrangement. These arrangements are agreed upon case-by-case basis and tailored to individual circumstances and liabilities. You will have to prove to the HMRC that your reasoning for applying for the Time to Pay service is valid and that you are not deliberately trying to avoid paying your tax bill on time. HMRC will assess your request based on the amount of your tax bill, your industry, and your previous payment history.

HMRC will usually only offer taxpayers the option of extra time to pay if they think they genuinely cannot pay in full now but will be able to pay in the near future. If HMRC does not think that more time will help in paying what is owed, they can require immediate payment of a tax bill and start enforcement action if payment is not forthcoming.

If you would like more advice and assistance with Time to Pay Agreement, please contact us at info@gkaccountingservices.com or call us on 01269 508 081, where we will be more than happy to answer any of your questions.