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Published on 7 January 2011by Tony Groom

The Questions HM Revenue and Customs Asks to Assess a request for Time to Pay Arrears

Recently uploaded guidelines for HM Revenue and Customs case officers dealing

with requests from businesses in difficulty for time to pay arrears of VAT, PAYE or tax,

reveal the detail of what questions will be asked before the request for a Time to Pay

arrangement (TTP) can be considered.

Applicants must be able to show that they have tried to raise the money they owe

by other means beforehand. Individuals, which includes sole traders and the self

employed, may be asked to show that they have approached their bank or asked

friends or family for a loan or that they cannot pay the debt via a credit card.

However, the advice to case officers also states that for individuals “it is

unacceptable for us to insist that a customer has made every effort to secure a loan

before agreeing TTP” because it would contravene Office of Fair Trading Debt

Collection Guidelines.

Both individuals and larger businesses may also be asked whether they have any

assets that can be easily converted into cash or any savings that they could use to

settle the debt, even if early withdrawal might incur a payment penalty. This also

applies to endowment or life insurance policies, although the HMRC cannot insist

that these are cashed to pay a debt.

The HMRC distinguishes between debts below £100,000 and debts above that

amount and for larger businesses HMRC would want to see evidence, usually a letter

from the bank, that the company has approached their bank and discussed

borrowing facilities beforehand as well as exploring options for raising money from:

shareholders, Directors, book debt factoring and invoice discounting, stock finance,

sale and leaseback of assets or venture capital providers.

It would make sense, therefore, to have a thorough business review and the support

of a rescue adviser or insolvency practitioner to assess the business viability and

explore all these options and to document them before approaching HMRC.

K2 Business Rescue The Emergency Service for Business

Call Tony Groom on 0844 8040 540

The case officer will want to know more than this, including information they will have

available from the Revenue’s own records. This will include whether the applicant

has a previous history of paying on time, whether they have had a previous TTP and

whether they have ever been late with payments. Previous difficulties will weigh

heavily in the final decision.

The situation will be more serious and the ability to agree a TTP more difficult if there

are any outstanding Revenue returns and the applicant can give no good reason

why they are late. The case officer must then ask that the missing returns are

submitted within a month and the applicant must make the largest payments

possible in the meantime. If neither of these is done the Revenue are required by

policy to start recovery proceedings.

Finally, the case officer must assess whether the business is viable or not. Again

providing evidence for this is easier with the help of a review from a rescue adviser or

insolvency practitioner.

The HMRC guidelines advise case officers that they should consider how serious the

problem is and how long it is likely to last, what the applicant is doing to correct the

problem and judge if the proposed TTP arrangement is realistic. If the business thinks it

can trade through the difficulties by increasing sales the case officer must establish if

they have signed agreements or are just bidding for new contracts and what steps, if

any they are taking to reduce costs and over how long.

It should also be remembered that even if a TTP arrangement is agreed it is subject to

a number of conditions, not just repaying the arrears on time but also paying all

future liabilities on time. Being realistic about all the company’s income and

expenditure, liabilities and assets often needs input from an advisor to ensure the

arrangement is achievable to avoid the risk of it being terminated due to default.

We are not Insolvency Practitioners. We operate within the law to protect our clients and their wealth. Our team has worked for over 20 years to help stabilise and return hundreds of businesses to profitable growth. Once appointed, Insolvency Practitioners do not work for you, they work for creditors and use your company’s assets to pay themselves. We work for you, not creditors.

More Free Resources for Directors and Business Owners in Difficulty www.rescue.co.uk

We Save Businesses We provide experienced advice to directors

We negotiate with HMRC and creditors We are on your side

Need Immediate Help – Call Tony Groom on 0844 8040 540

K2 Business Rescue The Emergency Service for Business

Call Tony Groom on 0844 8040 540