'Time to pay' problems
Since 2008 HM Revenue & Customs (HMRC) has provided the ‘Time to Pay’ (TTP) scheme, a rapid response service to businesses that need more time to pay their tax liabilities.
Since then the qualifying conditions for TTP have been tightened up considerably.
Sometimes the guidelines for this scheme are misunderstood, leading to businesses being refused a TTP arrangement when one should otherwise have been granted.
There is a myth that TTP cannot cover Pay As You Earn (PAYE) liabilities; in fact it can. If the PAYE due is less than £10,000 and it can be paid within 12 months, HMRC should grant TTP. Larger debts or longer payment periods will be referred to a senior HMRC officer.
If the PAYE liability relates to the 2010/11 tax year there could be a penalty for late payment. Unfortunately, the PAYE computer that issues penalty warning letters does not record that a TTP arrangement has been set up.
Do not ignore a warning letter, because you may have to pay the penalty if you cannot meet your agreed instalment plan under your TTP arrangement. Reply to the warning letter, setting out:
- The date you requested TTP.
- The PAYE months included in the arrangement.
- The agreed payment amounts and dates.
All contractors in the construction industry scheme (CIS) have their tax records regularly reviewed to see if they still qualify for gross payment status. If the CIS computer finds that you have failed to pay your tax on time, your gross payment status is withdrawn. The CIS computer will not know if you have a TTP arrangement, so any late payment of tax will be marked as a failure. You need to appeal in writing within 30 days against the withdrawal of gross payment status, and your appeal should include all the details of your TTP arrangement, as listed above.
Another problem with TTP is caused by the debt management computer in the Tax Collector’s office. This computer has been known to issue distraint (or in Scotland ‘poinding’) notices to businesses that have agreed TTP for their tax debts. If you receive a distraint or poinding notice you need to take action immediately, or you could have your goods seized by a bailiff or Sheriff’s Officer. Please contact us without delay if any of the above situations apply to you.