Business and self-employed taxpayers with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.

At a glance

Under aTime to Pay agreement taxpayers can set up a payment plan to spread the cost of their outstanding tax bill.

Self employed taxpayers

You are able to ask for Time to Pay if you:

  • owe £30,000 or less
  • do not have any other payment plans or debts with HMRC

A Time to Pay agreement for self employed taxpayers can now be made online.

You choose how much to pay straight away and how much you want to pay each month. You’ll have to pay interest.

All taxpayers

  • A Time to Pay arrangement is normally agreed by HMRC on a case-by-case basis and tailored to individual circumstances and liabilities.
  • HMRC have a dedicated helpline on 0800 024 1222 specifically to deal with COVID-19 related time to pay requirements.

Online applications

These can only be made online if you are self employed and have registered for HMRC's online services.

What information do you need to agree a Time to Pay?

HMRC will discuss your specific circumstances to explore:

  • Agreeing an instalment arrangement.
  • Suspending debt collection proceedings.
  • Cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately.

The rate of interest on underpaid tax has been reduced to 0.1% with effect from 30 March 2020 for quarterly instalment payments and 7 April 2020 for non-quarterly instalment payments.

Existing Time to Pay scheme

The key points to note with the existing time to pay scheme are:

  • If you know you will have difficulties making your tax payments, you should contact HMRC or make an online application as soon as possible. HMRC’s systems do not allow payment arrangements to be set up too far in advance meaning that you may need to contact them 1-2 weeks before the due date for the payment.
  • You should make sure as far as possible that all returns are filed up to date. HMRC are more likely to agree payment arrangements if there are no outstanding returns.
  • HMRC may require cashflow forecasts, budgets and details of assets and liabilities to support the request for time to pay.
  • HMRC will expect you to tell them how much you can afford. They will not tell you. You should expect to pay a fixed amount each month.
    • Do not be overambitious, it is better to take longer to pay than to commit to something unrealistic and then not be able to meet the agreed amounts and payment schedule.
  • Once you have an agreement in place you must pay future tax liabilities on time or renegotiate your arrangements to include them.
  • As long as you have an agreement in place before the deadline for late payment penalties to be charged you will not have to pay penalties. Under current arrangements interest remains due.
  • If your business has multiple tax debts you may need to prioritise which you pay and which you seek time to pay for. It can be harder to negotiate arrangements for VAT, PAYE and NICs than for Income Tax and Corporation Tax so consider whether you should pay these first.
  • If you do not agree time to pay arrangements with HMRC and fail to pay your tax interest and penalties will be charged. It is not yet clear to what extent HMRC may waive penalties due to COVID-19. 

Links to our guides

COVID-19: Government support tracker
This tracker covers measures announced by the government to support individuals and businesses, as we get through COVID-19.

External link

HMRC guidance: If you cannot pay your tax bill on time

 

Comments (1)

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I wonder if there is a knock-on effect from furloughing someone at 80%. if they elected in their 2019 return to collect tax due 31/1/20 by PAYE codiing out from '20/21 salary, and that salary is now reduced to 80% of normal, are they going to...

I wonder if there is a knock-on effect from furloughing someone at 80%. if they elected in their 2019 return to collect tax due 31/1/20 by PAYE codiing out from '20/21 salary, and that salary is now reduced to 80% of normal, are they going to receive an unwlecome letter from HMRC to say the tax cannot be coded out.

I have one client who has received a letter in exactly that situation. I cant currently get through to Agents Priority line to clarify the reasons and wondered if others had the same experience.

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