The taxman will close down a business that can’t or won’t pay its tax bills. However, where the business is experiencing temporary cash-flow problems he may be prepared to accept payment by instalments under a ‘time to pay’ arrangement (TTP).
There are conditions: your business must be in genuine financial difficulty, and it must be likely to be able to pay if given more time. However, the taxman won’t grant TTP to people who ask again and again, or to those who don’t keep their promises. Once you have signed up to a schedule, you must pay every instalment on time. If you miss just one payment they’ll demand the whole amount with penalties, surcharges and interest.
It’s worth having detailed financial information ready to make a case for leniency. If your business needs to spread payment of a tax liability of £1 million or more, an accountant’s report will be required to persuade the taxman to accept instalments.
There are some major concessions: if you agree a time to pay arrangement before VAT falls due, there are no default surcharges to pay. A construction industry business can defer tax without losing its entitlement to be paid gross.
The important thing is to be prepared. You must put a proposal for TTP to HMRC’s business payment support service before the due date – don’t wait until those final demands arrive.