How to use the ‘Time to Pay’ arrangement for VAT

How to use the ‘Time to Pay’ arrangement for VAT

The introduction of the new penalty regime for VAT in 2023 made it clear that HMRC believes that all VAT registered persons have a responsibility to account for and pay over the VAT that they have collected from their customers during the course of carrying out trading activities, in a timely manner. For most VAT registered persons, the liability to pay over the VAT collected falls due each quarter.

However, HMRC does recognise that from time to time, businesses can encounter difficulties and may find themselves in a position where a large sum of VAT is due to be paid at the end of a VAT quarter, but having the cash in the bank to actually cover the payment is not possible. This may be due to receiving late payments from customers, which then impacts cashflow.

As a result, HMRC have now set up an online, self-serve Time to Pay option which makes securing a Time to Pay arrangement a little more accessible. The new service is available via the taxpayer’s Business Tax Account which can be accessed using this link https://www.tax.service.gov.uk/set-up-a-payment-plan/govuk/vat/start.

The previous process

Those taxpayers who have used a Time to Pay arrangement in the past will be aware of how daunting and potentially challenging the process can be. Previously, the taxpayer was required to contact the business payment support service and provide information as to how much was owed for the quarter, how much cannot be paid in full, why there was insufficient funds to pay the VAT liability and put forward their proposal for a payment plan (i.e how much can they afford to pay each month and over what period of time).    

The new online process

The online service is now available to those taxpayers who meet the following conditions:

• Their latest VAT return has actually been filed
• The amount owed to HMRC is £20,000 or less
• Their application for the Time to Pay arrangement is made within 28 days of the payment deadline
• They do not have any other active Time to Pay arrangement with HMRC for VAT or any other debts with HMRC
• They are able to repay the debt over the period of six months

Please note: taxpayers on the annual accounting scheme, cash accounting scheme, or those who are required to make payments on account, will not be able to utilise this service.

If, as a taxpayer, you find yourself in the position of being unable to meet your quarterly VAT payment, we would always recommend contacting HMRC immediately – having an agreed Time to Pay arrangement in place will avoid the issue of a penalty being raised for a late payment of VAT. Using the new service, this should now be a faster and more convenient way to make contact.

If you feel that you would like further assistance with the online service or are concerned that it will not benefit your business, please get in touch with our HB&O VAT department who will discuss this with you. They can also consider the other options that may be available to help you get through a difficult period and can look into longer term solutions to aid your business’s VAT cashflow.

Email: [email protected]

Phone: 01926 422292 or 02476 306029