Can I negotiate with HMRC?

How do I get more time to pay my company’s tax bill?

The idea of negotiating with HMRC might seem foreign to company directors who regularly receive payment reminders, demands and even penalties. However, if you are genuinely unable to pay a company tax bill on time, such as your corporation tax, HMRC may be more open to negotiating than you may think. 

HMRC understands that working capital ebbs and flows, and sometimes unexpected expenses may reduce the money available to pay your tax bills. If you find yourself in that position, you should contact HMRC as soon as possible to negotiate an affordable payment plan. Known as an HMRC Time to Pay Arrangement, it allows you to pay what you owe through a series of monthly instalments. 

What is an HMRC Time to Pay Arrangement?

A Time to Pay Arrangement is a payment plan you can negotiate with HMRC that gives you, as the name suggests, more time to pay what you owe. You can pay off VAT that you cannot afford, as well as arrears of corporation tax, PAYE, National Insurance contributions, Income Tax and Corporation Tax debts via affordable monthly instalments.

HMRC Time to Pay Arrangements typically last three to six months, but you can get up to 12 months or more in some circumstances. One of the benefits of a Time to Pay Arrangement is that you tell HMRC how much you can afford to pay each month, not the other way around. That allows you to negotiate a fixed monthly payment your company can comfortably afford while meeting your ongoing financial obligations. 

Time to Pay Arrangements also provide some flexibility, allowing you to amend them over time. For example, it may be possible to lengthen your agreement if your expenses increase or shorten it if your sales exceed your expectations. That’s part of the reason why around 90% of Time to Pay Arrangements are completed successfully. 

Can I apply for an HMRC payment plan online?

For outstanding PAYE and Self Assessment or VAT tax bills you can't afford, you can usually set up a payment plan online without having to call HMRC. That simplifies the process, as it can take time to get through on the HMRC helplines. 

You can set up a payment plan online if: 

• VAT bills - You owe £50,000 or less, plan to pay your debt off within 12 months and have a debt from 2023 or later.  
• Employer PAYE contributions - You owe £50,000 or less, can pay the debt off within 12 months and have debts that are five years old or less.
• Self Assessment bills - You owe £30,000 or less, plan to pay off the debt within 12 months and it’s less than 60 days since the payment deadline. 

To apply for a Time to Pay Arrangement online, you must have filed all your tax returns and not have any other ongoing payment plans or debts with HMRC. If you do not meet the criteria or have Corporation Tax debts, you’ll need to pick up the phone to negotiate a payment plan.  

How do I negotiate a payment plan with HMRC?

If you cannot set up an HMRC Time to Pay Arrangement online, you can call the relevant payment helpline from 8am to 6pm, Monday to Friday, using the details below:

• PAYE payment helpline - 0300 200 3819
• Self Assessment payment helpline - 0300 200 3820
• VAT payment helpline - 0300 200 3831
• Corporation Tax payment helpline - 0300 200 3840

During the call, you’ll need to provide your Unique Taxpayer Reference (UTR) number, company registration number and the reference number of the bill you want to discuss. You are likely to be asked questions about the company’s financial position and the efforts you have made to pay the debt. For example:

• What other debts does the business have?
• What is its current financial position?
• How much cash do you have in company bank accounts?
• How do you expect the business’s financial position to change in the future?
• What efforts have you made to repay the debt?
• How will you make sure you can pay future tax payments?

It will also expect you to reduce the debt amount as much as possible before setting up the payment plan. For example, it may ask you to sell company assets such as stock or vehicles, find new sources of finance or put personal funds into the business. 

HMRC will also want to know how much you can realistically afford each month to clear the debt as quickly as possible. As a rough guide, it will expect your payments to represent around 75% of the company’s monthly disposable income. 

That can be a bit of a balancing act, as you should try to clear the debt as quickly as possible to reduce the interest you’ll pay on the outstanding amount. However, HMRC will not accept your proposal if it doesn’t think you can afford it.   

Tips for negotiating with HMRC  

We have successfully put hundreds of Time to Pay Arrangements in place for company directors over the years, but it is possible to negotiate with HMRC yourself. Here are a few things to consider if you do: 

• Contact HMRC or make an online application before you miss a payment deadline to avoid late payment penalties.
• It tends to be more difficult to negotiate Time to Pay Arrangements for VAT, PAYE and NICs, so if you have multiple tax debts, consider paying those first.  
• Don’t be overambitious with your monthly payments, as if you cannot stick to the plan, HMRC may cancel the arrangement and add additional penalties.  
• Make sure all your other tax returns are filed and up to date to increase the likelihood of making an arrangement.  
• Always have a clear plan before you pick up the phone. You should have a genuine reason for being unable to pay, be able to provide evidence of the efforts you’ve made to pay the bill and have accurate and up-to-date financial information.

What if I can’t negotiate a payment plan with HMRC? 

HMRC does not offer every company a Time to Pay Arrangement. It may refuse your proposal if you have a poor payment history, have not made sufficient efforts to pay the bill or your arrears are too large. HMRC may also refuse if it believes your company is no longer viable and is at risk of becoming insolvent. 

However, there are other options. If your company is insolvent, you may be able to make a Company Voluntary Arrangement (CVA) with your creditors. If 75% of your creditors (by value of debt) agree to your proposals, you will have a typical period of three to five years to pay what you owe via monthly instalments. Unlike a Time to Pay Arrangement, a CVA is legally binding and may also write off some of your debt.  

Company Administration is another option for businesses facing severe financial pressure. It gives the company legal protection from its creditors, including HMRC, so an administrator can restructure the company and increase its profitability before returning it to the directors or selling it on.  

If the company is no longer financially viable, a Creditors’ Voluntary Liquidation (CVL) may be your best option. An Insolvency Practitioner will close the company and sell its assets to repay its creditors, including HMRC, as much as possible. Any remaining debts will be written off and the company will be closed.  

Do you need help negotiating with HMRC?

Negotiating with HMRC is often daunting for company directors, but it’s not something you have to do yourself. At UK Liquidators, we can negotiate on your behalf to get the best possible result. We also assess your company’s circumstances and advise you on the best route forward, whether that’s a Time to Pay Arrangement or another option. 

Please get in touch for a free consultation with our Insolvency Practitioners or arrange an in-person meeting at your nearest office.