Paying corporation tax on time can sometimes be a challenge, especially if your business is facing financial difficulties. Fortunately, HMRC offers a Time-to-Pay (TTP) arrangement to provide businesses with some breathing room when it comes to paying tax debts. If you’re struggling with your corporation tax payment, this guide explains everything you need to know about the TTP arrangement, eligibility, how to apply, and expert tips to ensure smooth management of your payment plan.
What is a Time-to-Pay Arrangement?
A Time-to-Pay (TTP) arrangement is a payment plan offered by HMRC that allows businesses to pay their corporation tax debt in instalments. This arrangement is especially helpful for businesses experiencing temporary cash flow problems. However, it’s important to note that TTP agreements are not automatically granted; businesses must negotiate the terms with HMRC based on their specific financial situation.
Who Is Eligible for a Corporation Tax Payment Plan?
While HMRC considers each application individually, businesses that meet certain criteria are more likely to qualify for a TTP arrangement. You might be eligible if:
- You owe less than £30,000 in corporation tax.
- You can repay the debt within 12 months.
- Your tax returns have been filed and up to date.
- You are within 60 days of missing the payment deadline.
- You have no other outstanding tax debts.
- You are not on any other payment plans.
HMRC is often more understanding of businesses facing unexpected situations, such as the sudden loss of a major client or health issues affecting key personnel.
Interest Rates and Penalties
For the 2024/25 tax year, the interest rate for late corporation tax payments is 7.75%. This rate is subject to change in line with the Bank of England’s interest rate decisions. It’s important to stay updated with the latest information on HMRC’s website.
However, when you enter a TTP arrangement, you will not be subject to late payment penalties as long as you adhere to the agreed-upon payment schedule. You will only incur interest on the outstanding amount from the original due date.
How to Apply for a TTP Arrangement
If your business needs help managing its corporation tax payments, here’s how you can apply for a TTP arrangement:
- Gather Necessary Information: Before contacting HMRC, ensure you have the following:
- Your company’s registration number.
- Your company address and contact details.
- Your Unique Tax Reference (UTR) number.
- Any other details about your tax payments, expected repayments, and an explanation of your financial difficulties.
- Contact HMRC: Call HMRC’s Business Payment Support Service to discuss your options. If necessary, you can seek help from a tax professional to increase the chances of getting your request approved.
- Negotiate the Payment Plan: Be prepared to clearly explain your financial situation and how you plan to repay the debt. HMRC will want to understand why you missed the deadline and what steps you’ve taken to resolve your cash flow issues.
Tips for Negotiating with HMRC
When negotiating a TTP arrangement, a clear and honest approach works best. HMRC is more likely to accept a payment plan if it shows that your business is committed to paying off the debt as quickly as possible.
Here are some strategies to strengthen your case:
- Provide financial projections that show how you will manage future tax payments.
- Consider offering security against the debt if your business is struggling.
- Work with tax experts who can help you prepare a solid case and improve your chances of approval.
Managing Your Corporation Tax Payment Plan
Once your TTP arrangement is in place, it’s essential to stick to the agreed payment schedule and continue filing tax returns on time. Make sure to also pay any new tax liabilities as they become due. If your financial situation changes, inform HMRC immediately to adjust your plan accordingly.
Strategy Tip: Consider setting up a separate savings account specifically for corporation tax payments. This will help you stay organized and avoid falling behind in the future.
What If You Miss a Payment?
Failing to make a payment under your TTP arrangement can lead to serious consequences. HMRC may cancel the agreement, apply late payment penalties, and take enforcement action, such as:
- Seizing company assets via a Distraint Order Notice.
- Filing a Winding Up Petition, potentially forcing your business into liquidation.
If you believe you may miss a payment, contact HMRC as soon as possible. In some cases, they may be willing to renegotiate the payment plan or provide a temporary extension.
Getting Professional Help
While you can apply for a TTP arrangement directly with HMRC, many businesses benefit from professional assistance. Tax advisors and insolvency practitioners can:
- Help you prepare a compelling case for a TTP arrangement.
- Negotiate with HMRC on your behalf.
- Advise you on alternative solutions if a TTP arrangement isn’t the best option for your situation.
Working with experts can increase the likelihood of securing a favorable outcome and ensure compliance with all tax obligations.
Conclusion
HMRC’s Time-to-Pay arrangement is an essential tool for businesses struggling with corporation tax payments. By understanding the application process, adhering to the payment schedule, and negotiating effectively, businesses can manage their tax obligations and avoid penalties. If you’re facing difficulties, don’t hesitate to seek professional advice to help navigate this process and secure the best possible outcome for your business.
