A HMRC Time to Pay arrangement (TTP) is a formal agreement between the tax office and a business that is struggling to pay its arrears. If approved, it affords the company with up to 12 months to pay off their debts, instead of in one lump-sum.
Time to Pay arrangements have been a common method for UK businesses struggling to meet their tax liabilities to stay afloat while manageably paying off all debts. They can be used to repay any form of taxation, however it is most common for a TTP to be used to settle Corporation Tax, Value Added Tax (VAT), and Pay as You Earn (PAYE) arrears.
The purpose of a HMRC Time to Pay arrangement is to present an opportunity for a struggling business to turn its fortunes around. The pressure that comes with a company faced with financial issues can have a knock-on effect to all aspects of the business. It can affect relationships with distributors and customers, cause the company to spiral, employees can become jaded, and it can have an effect on the day-to-day home life of directors. TTP can allow some much needed breathing room, a way to curb some of these pressures and refocus the company’s efforts.
If HMRC has a reason to believe that your business is at imminent risk of insolvency, it is possible that they may act to recover funds, closing the door to any support. The purpose of Time to Pay is to support viable companies in need of help, not to allow poorly run firms to get away with not paying their tax arrears.
Being afforded the flexibility to spread tax debt repayments over a much more manageable period of time rather than being forced to repay it in one go, particularly when struggling, allows the company better cash flow so that operations can continue on a more even footing.