HMRC 'Time to Pay' change

HMRC have announced that from the 3 August 2015, it will be mandatory for all Time to Pay (TTP) arrangements to be collected by direct debit.

The benefits of paying by direct debit are; is more cost effective and secure than other payment methods, removes the possibility that payments will be forgotten, allows correct allocation of amounts to customer accounts, reduces the need to contact HMRC, thereby saving time for both the customer and themselves, and provides the customer guarantees under the direct debit scheme that are designed to protect the individual.

HMRC TTP arrangements have been in operation for a number of years, and allow viable businesses who are unable to pay their HMRC liabilities including; PAYE, NIC, VAT and Corporation Tax on the due date to spread them over a period the business can realistically afford. TTP are typically used to assist businesses with short-term cash flow problems, and whilst HMRC will always seek the shortest repayment term possible, they may be extended for more than a year in exceptional cases.

HMRC stress that TTP is not an automatic right, and should be sought before a debt is due to help to avoid penalties or adverse recovery action. Whilst TTP arrangements are a supportive measure by HMRC to temporarily assist viable businesses, they are subject to a number of conditions which a business must adhere to prevent default, including; payment of future liabilities on time, increased payments if circumstances improve during the TTP arrangement period, and possibly the provision of information to assess the viability.

With the Chancellor’s comments in the latest budget confirming that HMRC’s collection powers will be increased in the future by being able to directly recover money from customers bank accounts, it is more important than ever for customers to be proactive in dealing with HMRC debts. When introduced, these new powers, plus the mandatory imposition to collect TTP by direct debit, highlight the fact that HMRC continue to tighten their collection stance.

RSM has a dedicated national team who have assisted many businesses in obtaining TTP arrangements, as they are an excellent tool for a viable business in managing working capital though a tough period. If your client’s business requires additional working capital to ease cash-flow pressures caused by seasonality of sales, one-off events such as bad debts, contract delays or other short-term issues, we are able to advise on the opportunity and merits of approaching the HMRC to obtain a short-term TTP arrangement. Please contact your local representative for further details:

Steve Merchant, Partner, Bristol

Gavin Stewart, Partner, Manchester