1. HMRC’s Assessment Criteria for a Time to Pay Arrangement for Revenue Arrears #025
As businesses face continued tough trading conditions in 2011 a new series of
guidelines has appeared on the HM Customs and Revenue (HMRC) website on the
arrangements for paying arrears of tax, VAT and PAYE, known as Time to Pay (TTP).
Although the guidelines are aimed at those working in the revenue service they are
equally useful for businesses in difficulties, for turnaround and rescue advisers and for
insolvency practitioners in outlining the questions and conditions businesses will need
to be prepared for if they are in arrears with revenue payments and looking for a
manageable way to spread the repayments.
The first point to recognise is that in all cases the repayment period to be set will be as
short as possible and usually no more than a year. Repayment arrangements of more
than a year will only be permitted in what are called “exceptional circumstances”.
However long the arrangement, interest will be charged while the debt remains
outstanding.
There is no entitlement for a business to be granted a TTP. HMRC officers must
consider the timescale being requested by the “customer”, their previous payment
history and the amount outstanding. The underlying consideration is that the longer
the time period of non-payment has been and the higher the amount, the greater
the risk to HMRC. Therefore an application is more likely to be viewed favourably if the
request for a TTP is made before the due date for payment.
There are two further conditions that must be met for a business to have a chance of
achieving a TTP and they are that the applicant must have the means to make the
agreed payments as well as the means to pay other tax liabilities that become due
during the TTP period.
The amount of detailed information that will be requested from the applicant will vary
according to the level of the debt, divided into three categories, for debts below
£100,000, from £100,000 to £1 million and for more than £1 million.
However, whatever the level of arrears, for a successful TTP to be achieved any
business in difficulty is strongly advised to be honest with itself and its advisers about all
its outstanding debts and liabilities if it is to be able to stick to any TTP arrangement.
This is because, although HMRC is bound by any TTP arrangement agreed, it can
withdraw from the arrangement if it discovers that the applicant has been misleading
or untruthful, if they default on the arrangement or fail to satisfy any TTP conditions or if
any other reason comes to light where it becomes apparent that tax is at risk.
When proposing a TTP arrangement, the applicant must reconcile the tension
between HMRC’s approval criteria and in particular their desire for a short term
arrangement and the company’s ability to keep to the agreed monthly payments,
and in particular avoiding default terms such as paying future obligations on time.
Therefore, when considering a request for a TTP arrangement, HMRC officers are
required to consider whether the applicant falls into the “can’t pay” or the “won’t
pay” categories. Again, the applicant’s credibility is under scrutiny and the
judgement is likely to depend on the experience of the HMRC case officer as well as
the details of the information provided. If, in the case officer’s judgement the
applicant cannot realistically pay off the arrears then a TTP will not be allowed.

2. Finally, the guidelines make it clear that the preferred method of dealing with TTP
requests is by telephone, because it allows for detailed questioning of the viability of
the business, and therefore whether the proposed TTP will have a chance of
succeeding, as part of the assessment of whether the situation is a “can’t” or a
“won’t” pay.
It is crucial, therefore, that before the telephone conversation that applicant has all
the required information on income and expenditure prepared and ready with the
help of a rescue adviser or insolvency practitioner so that they can remain calm
throughout what can be a stressful situation.