United Kingdom
Time to Pay - Frank Goldberg
Many advisors will have clients experiencing cash flow difficulties in the current economic climate, especially those operating SME or owner managed business. This, coupled with the inescapable fact of having to pay taxes, can cause huge difficulties. A business, or individual, may be fundamentally viable, but it is cash flow (or rather the lack of it) that often kills. Yet while it is sometimes possible to negotiate an arrangement with HMRC to assist with the payment of tax liabilities, known as a ‘Time to Pay’ (TTP) scheme, this is still an unknown area, with many Advisors (and Accountants for that matter!) simply being unaware that this is something they can and should be recommending to their clients.
So what is TTP and how does it work?
The taxman is a little more understanding than people realise. For over three years now, HMRC has allowed companies and individuals to defer paying taxes and duties through its time to pay (TTP) scheme. This does not look like ending any time soon. We have dealt with over 180 such cases since the scheme started, for a very wide range of clients; and we have usually achieved successful outcomes.
Any tax or duty can potentially be part of a TTP arrangement. Apart from the more usual requests for deferral of PAYE, VAT and/or CT, we have dealt with Air Passenger Duty, SDRT and tax due as part of HMRC investigation settlements. No amount is too small, or too large. Our smallest successful deferral was for just £25,000 of PAYE; the largest was for more than £14 million of PAYE and VAT.
The overarching point to make is that HMRC are concerned with getting the money owed to them. For the same reason, while a bank may not be prepared to lend more money, it will tend to support a TTP application as it won't want to lose a client.
Helpful as they can be, though, TTP arrangements will only work if they are properly handled. First, it's important to act early: calling us the day after default is not a sensible course of action. As soon as a default looks likely, get in contact, agree a deal, and keep to it – failure to make payments agreed in a TTP arrangement may well lead to distrait action or applications to put the company into liquidation.
Professional input will ease the process. If you have a client who is experiencing cash flow difficulties and is considering an approach to HMRC a professional advisor can help by:
- Setting out what would be required for an approach to HMRC;
- Drafting a TTP application and reviewing cash flows and other supporting documentation, frequently asked for in support of such requests;
- Liaising with HMRC to help guide the application through.
For more information, please contact Frank Goldberg: frank.goldberg@bdo.co.uk
AUGUST 2012