insideKENT Magazine Issue 99 - June / July 2020 | Page 54
FINANCE
Time to
Pay
Arrangements
by Robert Reynolds, Regional Managing Partner
AS HMRC'S APPROACH TO COVID-19 CONTINUES TO EVOLVE AS THE CRISIS
UNFOLDS, WE TAKE A LOOK AT TWO FACILITIES IT ALREADY HAS IN PLACE
- 'TIME TO PAY ARRANGEMENTS' AND 'QUARTERLY INSTALMENT PAYMENTS'
WHICH COULD HELP YOU TO MANAGE YOUR TAX PAYMENT.
A Time to Pay Arrangement is a debt repayment
plan to HMRC for your outstanding taxes. If
you are considering this arrangement, we advise
having the following information to hand to
help HMRC make a decision:
• Your HMRC reference number (for example,
your 10-digit Unique Taxpayer Reference
or VAT registration number), the tax liability
that you are finding it difficult to pay and the
reasons why.
• What you have done to try to obtain the funds
to settle the liability.
• Your thoughts on how much you can pay
immediately and how long you may need to
pay the rest. Clearly, the longer the payment
period, the more chance that HMRC will
challenge the application.
• HMRC may ask for evidence, such as cash
flow forecasts, monthly management accounts
or copies of bank statements, showing that you
will be able to pay future instalments.
• HMRC is likely to want to understand your
financial position, such as your income and
expenditure and your assets and liabilities.
If you have entered into a Time to Pay
Arrangement with HMRC before, then it is
likely that they may ask more in-depth questions.
In more complex cases, they may ask for
additional evidence before they make a decision.
Quarterly Instalment Payments
Companies that pay Corporation Tax by
Quarterly Instalment Payments (QIPs) often
base the calculation of tax payable on annual
budgets or other forward-looking projections.
These may have been prepared before the
potential financial implications of Coronavirus
were apparent. Such companies can reduce their
QIPs, based upon updated expectations of
profitability, without prior approval from HMRC
though they should keep a brief summary of
their reasons for doing so.
If ultimately Corporation Tax is underpaid,
interest will be charged by HMRC at 1.75%
per annum (to be reduced following the reduction
in the Bank of England’s base rate) on amounts
underpaid.
In such uncertain times we consider that there
is little or no risk that companies will be charged
a penalty if tax is underpaid. When QIPs were
introduced, HMRC were clear that penalties
would only apply if companies were being
reckless or ignoring QIPs completely.
If companies consider they have overpaid QIPs,
they can request a repayment from HMRC.
This is generally paid without query within 2-
3 weeks, unless there is an open enquiry. If the
amount is over £150,000 additional security
measures need to be complied with by HMRC
before payment can be released.
Available assistance
A dedicated helpline has been set up by HMRC
to help businesses and self-employed individuals
in financial distress and with outstanding tax
liabilities. Through this, businesses like yours may be able to
agree a bespoke ‘Time to Pay’ arrangement.
If you are concerned about being able to pay your tax
due to Coronavirus, call HMRC’s dedicated helpline on
0800 0159 559.
Local offices:
Ashford: 01233 629 255 / Canterbury: 01227 454 861
Maidstone: 01622 690 666 / Orpington: 01689 827 505
Sandwich: 01304 249 997
[email protected]
www.wilkinskennedy.com
wilkinskennedy
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