Do you owe HMRC tax money?

If you owe HMRC a debt and you cannot pay on time then an HMRC Time To Pay Arrangement might be a good option for you and Oliver Elliot can help you negotiate one.

Find out how

HMRC Tax Debts Information

People owe debt to HMRC for a variety of reasons and the best payment solution differs from individual to individual. It is possible to obtain support when in financial difficulty.

If you’re facing difficulty in making a tax payment you can ask HMRC about affordable monthly payment options. You can negotiate time to pay based on your income and expenditure.

Time to pay arrangements are based on an individual’s specific financial circumstances, so there is no ‘standard’ time to pay arrangement. HMRC will look at what you can afford to pay and then use that to work out how much time you need to pay.

HMRC will assess your ability to pay using an ‘income and expenditure’ assessment. This looks at your income, disposable assets and expenditure to calculate your disposable income.

HMRC typically expects you to pay no more than 50% of your disposable income. This may be higher if you have a very high disposable income. There’s no upper limit on the amount of time that someone can have to pay.

A time to pay arrangement can cover all outstanding amounts overdue including penalties and interest.

It’s designed to be flexible and is not a fixed, formal contract. Very usefully it can be amended over time, enabling it to be shortened if your earnings rise or if you receive a windfall, for example, an inheritance. Importantly it can also be lengthened should essential expenses increase, or income decrease.

90% of time to pay arrangements complete successfully!

How to contact HMRC to discuss a time to pay arrangement

If you cannot pay your tax bill and need help you should contact HMRC as soon as possible.

For Self Assessment, you may be able to set up payment plan online. This will let you pay your Self Assessment tax bill in instalments without contacting HMRC.

You can set up a payment plan to spread the cost of your latest Self Assessment bill if:

  • you owe £30,000 or less
  • you do not have any other payment plans or debts with HMRC
  • your tax returns are up to date
  • it’s less than 60 days after the payment deadline

What to expect during a call

During the conversation, HMRC will you a number of questions. Gather together the information you need before you call. This may include:

  • the reference number relating to the bill that you want to discuss
  • details of the amount of tax that you cannot pay, covering all debts outstanding to HMRC
  • why you’re not able to pay, and what your current financial circumstances are, outlined in what you can afford to pay
  • what you’ve done to try to pay your bill on time and in full
  • how you expect your finances to change in future
  • checking if a time to pay arrangement would be the best payment solution
  • your bank account details, so you can set up a Direct Debit for your arrangement

How we calculate what you can afford to pay

HMRC will ask about your:

  • current financial position, including income and expenditure, savings, investments and other assets
  • what you’ve done or what you’re doing to get your tax affairs back on track

Example of the form we use to gather income and expenditure information.

If you’ve discussed what you can afford with an independent debt adviser such as the Citizens Advice Bureau, HMRC will accept their equivalent income and expenditure form, called the ‘Standard Financial Statement’.

Based on the information provided, HMRC will calculate your monthly disposable income. This is your monthly surplus income after deducting your monthly expenditure. Usually, HMRC will expect 50% of your disposable income to be paid into your time to pay arrangement. HMRC expect 50% rather than 100% because they do recognise the need for the arrangement to be sustainable, and for you to be able to manage any unexpected changes in expenditure. You may wish to pay more than 50% to reduce the amount of interest you pay.

If you have a high disposable income, but still need additional time to pay, HMRC will work with you to agree a level of payment that balances clearing the debt quickly with your reasonable monthly expenses. This may mean that you pay more than 50% of your disposable income.

If your income and expenditure information shows that you do not have enough disposable income, HMRC may suspend collection activity until your circumstances change.

The length of the HMRC time to pay arrangement will depend upon how much you owe. There’s no upper limit on the length of an arrangement.

An HMRC time to pay arrangement will be based on the information you’ve shared with HMRC about your circumstances. HRMC will make sure that your monthly payment reflects what you can afford to pay so that it’s sustainable over the length of the agreement. HMRC does however ask in exchange that to help it support you:

  • be open and honest during the payment plan discussion
  • be ready to explain unusual or large items of expenditure
  • provide all the information asked for

HMRC usually accept what you tell them without asking for more details, but they may need more detail or evidence if your debt is large or complex.

How assets are treated when we agree a time to pay arrangement

If you have the means to pay your HMRC tax liabilities by realising assets, for example, savings, shares, or a second home, then they will discuss this with you.

If you have assets that both you and HMRC agree can be realised including equity in a property, then they will expect you to do so to reduce the debt as much as possible before they typically will agree an HMRC time to pay arrangement.

HMRC will not ask you to sell your family home. However, they may consider taking a charge on your home to secure the debt payable to HMRC if it’s not possible to agree an HMRC time to pay arrangement with you and you’re not able to pay by any other means.

HMRC will not expect you to access pension funds early to pay your debt. If you receive a pension this will be taken into account when considered as part of your income and expenditure position.

Debts that can be included in a time to pay arrangement

Any tax, duty, penalties or surcharges that you cannot afford to pay can be included.

Interest charged on time to pay arrangements

Interest accrues from the due date to the end of the time to pay arrangement. The interest payable will be included in overall debt covered by the arrangement.

After a time to pay arrangement has been agreed

If payment instalments are made on time

No further is action is necessary and future time to pay requests will be considered.

If you have a change in circumstances

If your situation improves and you can pay the bill quicker, then contact HMRC to increase your monthly payment.

If your situation worsens contact us and we will see if we can reduce your monthly payments.

If you cancel your Direct Debit or if payment fails

If you cancel your monthly payments or payments fail HRMC will contact you. They will ask why the monthly payment was not paid. If possible, they will then restore the payment arrangement or renegotiate it if appropriate. Hoewever, if HRMC cannot contact you, or they are not able to renegotiate, they may decide to take other action to recover the debt which may mean:

  • an HMRC field force officer will visit your home or place of business
  • county court proceedings
  • insolvency proceedings

If you have another new debt to HMRC

HMRC will expect any new debt to be paid in full, and on time. If you cannot pay in full, contact HMRC as soon as you realise this.

If you’re already making monthly payments into an HMRC time to pay arrangement, then this can be amended to include this new debt. However, before doing this they will need to discuss your income, expenditure and asset position.

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Disclaimer: HMRC Time To Pay Arrangement

This page: HMRC Time To Pay Arrangement is not legal advice and should not be relied upon as such. This article HMRC Time To Pay Arrangement is provided for information purposes only. You can Contact Us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.

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