Cartoon of hand emerging from messy desks to grab a life ring which is being offered
New VAT payment lifeline

Businesses with cashflow concerns that are struggling to pay a VAT bill can now apply online for a Time to Pay (TTP) arrangement.

A TTP arrangement is a tailored agreement with HMRC to pay outstanding tax liabilities over an agreed period of time, usually in equal monthly instalments.  As well as helping to spread payments, if you ask for a TTP arrangement within 30 days of the due date of the VAT payment (15 days from 1 January 2024) you can also avoid a late VAT payment penalty.  However, interest will still be charged on any overdue amounts at HMRC's interest rate, which is currently 7% per annum.

It has been possible to apply online for a TTP arrangement in respect of income tax Self-Assessment and PAYE for some time, but the service was only extended to VAT on 31 May 2023.

You can apply for a VAT TTP arrangement online provided you:

  • have filed your latest VAT return;
  • owe £20,000 or less;
  • are within 28 days of the payment deadline;
  • do not have any other payment plans or debts with HMRC;
  • plan to pay off the debt within the next six months; and
  • are not in the VAT cash accounting, annual accounting or payments on account schemes.

If you don’t meet any of these conditions you may still be able to agree a TTP arrangement, but will need to contact HMRC and discuss your options with an adviser.

 

This article reflects the position at the date of publication (19 June 2023). If you are reading this at a later date you are advised to check that that position has not changed in the time since.

We regularly publish articles on a range of tax and wider topical issues which affect employers. If you wish to subscribe to our monthly Employer Focus e-newsletter, please contact us.