HMRC expect all UK taxpayers to pay the tax they owe, in full and on time, whenever they are able to do so. However, in circumstances where a taxpayer is unable to meet its liability, HMRC are able to exercise a discretion to allow the taxpayer to pay tax after the due date, over an agreed period, and without incurring late payment penalties. This is known as ‘Time to Pay’ (TTP). The primary purpose of TTP is to assist HMRC collect taxes due efficiently and effectively. It is worth emphasising that there is no right for taxpayers to be granted TTP.
TTP agreements have offered essential support to UK businesses during the COVID-19 pandemic, however as restrictions lift, and Government support comes to an end, how HMRC respond to requests for additional or ongoing support could be critical to the future survival (or not) of many businesses. Coupled with the fact that HMRC now has preferential status if a business enters formal insolvency, will this tip the balance between business support and tax recovery? Of course we hope not, but HMRC holds the trump card and we will be monitoring how it chooses to play this over the coming months.
This alert considers what a TTP arrangement is, the considerations HMRC take into account when entering one, and how TTP is monitored and can be brought to an end.