HMRC updates when to set up ‘time to pay’ plans online
HMRC updates when to set up ‘time to pay’ plans online
In the first update to ‘time to pay’ guidance since 2021, HMRC has clarified when pay plans can be set up without speaking to them directly!
There has not been any change to the qualifying criteria for self-assessment taxpayers with the £30,000 limit on debt still in place.
The ceiling for businesses owing PAYE and VAT bills is £100,000 with the option to sign up online if the plan is to pay off the debt within the next 12 months and the debt is less than five years old.
It is possible to set up a payment plan online for self-assessment, PAYE and VAT bills, although the guidance states that taxpayers ‘may be able to’ do this, so in some instances it will be necessary to talk to HMRC to pay a tax bill in instalments.
A new time to pay plan for self-assessment can only be set up if all other debts with HMRC have been settled in full, and for self-assessment taxpayers, it has to be arranged within 60 days of the payment deadline and all tax returns have to be filed before an application will be considered.
Improvements to the self-serve system were added last year with the introduction of an affordability assessment. This allows a taxpayer to input their income and expenditure information and receive a recommendation for an affordable plan.
HMRC have warned: ‘If customers don’t engage with us, refuse to pay, or if a business has little chance of recovery, we take prompt enforcement action to collect the tax due where it is cost effective to do so.’
In addition, HMRC charges late payment interest at the current rate of 7%, although this is set to rise to 9% from April 2025, subject to Bank of England base rate changes.
Information to work out what businesses can afford to pay has been updated in the section ‘How we work out what you can afford to pay’. This confirms that businesses need to complete an income and expenditure assessment form to record details of how much the company or partnership receives and spends.
HMRC also requires details on how much cash is held in business bank accounts, and details of sales revenue and any other regular income, as well as outgoings and expenditure, including salary costs, inventory costs and outstanding creditor debt.
It is worth noting that HMRC expects 75% of the company or partnership’s disposable income to be paid into the time to pay arrangement.
If you are struggling to pay your tax, you should talk to your accountant here at Kennedys Accounting who will be pleased to discuss your situation with you.