News added on 31.01.2020

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Tax payments

HMRC softens time to pay arrangements

HMRC has published guidance on its time to pay arrangements, allowing some to pay their tax liability in instalments. What can you advise if a client is struggling?

Tax bill. You’ve successfully submitted all their tax returns on time and saved your clients from late filing penalties. However, your clients still need to find the money to pay their tax liabilities, and if they were late to provide the information, the amount may come as a shock. HMRC has published guidance which clarifies the time to pay arrangements.

Who can use the scheme? Anybody with a debt to HMRC can ask to spread the costs with affordable monthly payments. You should advise your client to contact HMRC as soon as possible to discuss their finances and agree a payment plan. The guidance confirms that HMRC won’t expect anyone to sell the family home or access pension savings early in order to pay their tax bill. However, if they have other assets that can be realised such as investments or a second home, HMRC may ask them to sell these before agreeing to a payment plan. This was previously interpreted to mean that a person with assets would not be eligible for time to pay arrangements; the new guidance says HMRC takes its responsibility seriously to make sure that people who can pay do so on time, whilst providing extra, bespoke support to people facing financial hardship or in personal difficulty. This suggests a shift towards a softer, more productive approach to unaffordable debts.

Self-assessment debts. Individuals can set up a payment plan online providing they:

  • owe £10,000 or less
  • have no other tax debts
  • have no other HMRC payment plans set up

What about penalties? If a payment plan is agreed with HMRC then late payment penalties will not be charged from the time that the agreement is in place, provided your client makes the agreed payments. However, interest will be charged on any payment made after the deadline (3.25% per annum).

Tip. If your client’s income has decreased, check whether you can reduce their payments on account for the current tax year.

HMRC’s guidance can be found here https://www.gov.uk/guidance/find-out-how-to-pay-a-debt-to-hmrc-with-a-time-to-pay-arrangement.

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