the questions hm revenue and customs asks to assess a request for time to pay arrears #026
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Published on 7 January 2011by Tony Groom
The Questions HM Revenue and Customs Asks to Assess a request for Time to Pay Arrears
Recently uploaded guidelines for HM Revenue and Customs case officers dealing
with requests from businesses in difficulty for time to pay arrears of VAT, PAYE or tax,
reveal the detail of what questions will be asked before the request for a Time to Pay
arrangement (TTP) can be considered.
Applicants must be able to show that they have tried to raise the money they owe
by other means beforehand. Individuals, which includes sole traders and the self
employed, may be asked to show that they have approached their bank or asked
friends or family for a loan or that they cannot pay the debt via a credit card.
However, the advice to case officers also states that for individuals “it is
unacceptable for us to insist that a customer has made every effort to secure a loan
before agreeing TTP” because it would contravene Office of Fair Trading Debt
Collection Guidelines.
Both individuals and larger businesses may also be asked whether they have any
assets that can be easily converted into cash or any savings that they could use to
settle the debt, even if early withdrawal might incur a payment penalty. This also
applies to endowment or life insurance policies, although the HMRC cannot insist
that these are cashed to pay a debt.
The HMRC distinguishes between debts below £100,000 and debts above that
amount and for larger businesses HMRC would want to see evidence, usually a letter
from the bank, that the company has approached their bank and discussed
borrowing facilities beforehand as well as exploring options for raising money from:
shareholders, Directors, book debt factoring and invoice discounting, stock finance,
sale and leaseback of assets or venture capital providers.
It would make sense, therefore, to have a thorough business review and the support
of a rescue adviser or insolvency practitioner to assess the business viability and
explore all these options and to document them before approaching HMRC.
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The case officer will want to know more than this, including information they will have
available from the Revenue’s own records. This will include whether the applicant
has a previous history of paying on time, whether they have had a previous TTP and
whether they have ever been late with payments. Previous difficulties will weigh
heavily in the final decision.
The situation will be more serious and the ability to agree a TTP more difficult if there
are any outstanding Revenue returns and the applicant can give no good reason
why they are late. The case officer must then ask that the missing returns are
submitted within a month and the applicant must make the largest payments
possible in the meantime. If neither of these is done the Revenue are required by
policy to start recovery proceedings.
Finally, the case officer must assess whether the business is viable or not. Again
providing evidence for this is easier with the help of a review from a rescue adviser or
insolvency practitioner.
The HMRC guidelines advise case officers that they should consider how serious the
problem is and how long it is likely to last, what the applicant is doing to correct the
problem and judge if the proposed TTP arrangement is realistic. If the business thinks it
can trade through the difficulties by increasing sales the case officer must establish if
they have signed agreements or are just bidding for new contracts and what steps, if
any they are taking to reduce costs and over how long.
It should also be remembered that even if a TTP arrangement is agreed it is subject to
a number of conditions, not just repaying the arrears on time but also paying all
future liabilities on time. Being realistic about all the company’s income and
expenditure, liabilities and assets often needs input from an advisor to ensure the
arrangement is achievable to avoid the risk of it being terminated due to default.
We are not Insolvency Practitioners. We operate within the law to protect our clients and their wealth. Our team has worked for over 20 years to help stabilise and return hundreds of businesses to profitable growth. Once appointed, Insolvency Practitioners do not work for you, they work for creditors and use your company’s assets to pay themselves. We work for you, not creditors.
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K2 Business Rescue The Emergency Service for Business
Call Tony Groom on 0844 8040 540