Anyone who cannot pay their self-assessment tax by the deadline will not face a late-payment penalty, provided they pay in full or set up a “time to pay” arrangement – which lets people spread their payments – by 1 April.

Falling behind on payments to HMRC can easily occur, often a result of bad debt or unexpected expenditure having an immediate negative effect on business cash flow. In order to continue trading, essential payments such as suppliers, wages, rent and utilities are often prioritised above payments to HMRC. If not repaid quickly, this situation can easily spiral out of control and become unmanageable.

The Time to Pay arrangement works by allowing struggling individuals and businesses to repay their outstanding income tax, corporation tax, PAYE/ NI or VAT liabilities in instalments, rather than in one go. Usually, Time to Pay arrangements last either 6 or 12 months. However, they may last longer if there is a realistic prospect the debt will be repaid eventually.

HMRC liabilities will not simply disappear overnight but seeking a Time to Pay arrangement has its advantages.

• You will be spreading out the repayment of your debt over a period of time, rather than all at once. This will improve your cash flow and ensure your business has money to pay other outgoings such as rent, wages and suppliers.
• Opting for a Time to Pay arrangement will demonstrate a willingness to repay liabilities. This helps you and your business remain on good terms with HMRC.
• Proactively seeking Time to Pay will decrease the likelihood of HMRC taking enforcement action against you or your business.

A Time to Pay Arrangement will give you and your business a chance to repay any missed income tax/corporation tax liabilities as well as other liabilities such as PAYE, VAT or National Insurance. If it is genuinely viable, an arrangement could be made which enables you or your business to pay in monthly instalments. It’s critical not to miss any payments as it could mean the arrangement breaks down.