Ho Ho … Oh!!

The latest Office for National Statistics report for October 2023 serves as a sombre warning that the cost of living continues to be a concern for the majority of the public. We hear stories of the eating vs heating dilemma for many families, including the self-employed, with the challenges of paying increasing food costs, utility bills and rent/mortgages. For many in such a situation planning for a tax bill that falls due at the end of January 2024 will not be a priority. Can we therefore expect to see an increase in the number of people approaching HMRC to discuss a Time to Pay (TTP) arrangement? 

HMRC, in recognition of the fact an increasing number of people found themselves in this position, set up a ‘self-service’ online facility to enable customers to apply for TTP arrangements several years ago. Interestingly, it increased the level of tax debt covered by the facility for income tax self assessment (ITSA) taxes from £10,000 to £30,000 in October 2020 provided taxpayers met certain criteria. Namely, that the return must have been filed, the tax due is below £30,000 and that the TTP arrangement is set up within 60 days of the payment deadline. HMRC provided statistics in November 2022 of the facility’s uptake for the 2020/21 tax return liabilities falling due on 31 January 2022. This confirms almost 142,000 people used the facility during the 12-month period to 5 April 2022 in relation to tax owed for the 2020/21 tax year. However, this statistic only relates to ITSA taxpayers using the self-service facility, which may mask a larger problem.

A look at HMRC’s performance indicator statistics for the 12-month period to 5 April 2023 shows the average number of customers in a TTP arrangement for the year was over 820,000 with TTP arrangements totalling £5.7bn in place by the end of the period. Moving forward to 2023/24 the HMRC statistics show the average number of taxpayers needing a TTP arrangement for the first two quarters to 30 September 2023 is 890,000 and with the largest application numbers expected to come in January to March 2024, this could increase to around one million taxpayers who for one reason or another find themselves unable to pay their tax bills as they fall due and need to agree payment terms with HMRC. The key message is to ensure that any TTP discussions are held with HMRC before the tax becomes due. With HMRC currently charging late payment interest at 7.75%, even on tax included in a TTP arrangement, it may not be such a merry post-Christmas for one and all.