Time to pay: Frequently Asked Questions

 
 

What constitutes a tax deferral request?

Any request to delay payment of VAT, PAYE, Corporation tax, or less often, Stamp Duty or National Insurance Contributions, constitutes a tax deferral request. This applies whether the requests is for one type of tax, e.g. VAT, or a combination of all of the above.

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What is an Independent Business Review (IBR)?

An IBR provides a common information platform that gives financial stakeholders of a business, typically lenders, a view of the solvency and viability of the business. We have developed a tailored IBR report in conjunction with HMRC, to ensure our IBRs address all of the criteria it has outlined, in a format that helps it to determine the viability of the company and assess the proposed payment plan.

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Will I need an IBR?

If you anticipate you will need to approach HMRC to consider deferring more than £1m of tax, you will need an IBR. HMRC will consider the combined total of requests, so, for example, if you are seeking to defer £500,000 of both VAT and PAYE, HMRC considers this as one request of £1m. In addition, it's possible that large six-figure deferral requests for more than one year might also require an IBR.

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Do I meet HMRC's criteria for a tax deferral?

HMRC will seek to use the IBR to help them answer three key questions:

  • Is the underlying business viable?
  • How much cash support does the business require?
  • Is the proposed repayment period reasonable and affordable?

It is likely HMRC will seek assurances that the company has exhausted all other sources of funding, and that a tax deferral request under the Time to Pay scheme is the last resort.

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Who pays for the IBR?

HMRC has stated that the cost of the IBR will be bourne by the business, which it feels is relatively small in comparison to the deferral amount. The costs of IBRs will vary, as it very much depends on the size and complexity of the business.

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Are there any other benefits to having an IBR?

We conduct a large number of IBRs for companies and their financial stakeholders, and in our experience the IBR is helpful and constructive, and helps companies to:

  • Get clarity around their options and make balanced decisions
  • Know how they are benchmarked against other peers in their sector or marketplace
  • Understand sensitivity analysis and the risks to their recovery.

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What does this change for businesses dealing with HMRC?

The requirement for an IBR signals a change in the landscape for businesses in their interactions with HMRC. It's possible, for instance, that HMRC will seek to have dialogue with other stakeholders in the business, especially to ensure that all other options to secure alternative funding have been exhausted. Nor is HMRC likely to tolerate a quantity of regular smaller requests; it will expect businesses to plan ahead for requirements. Likewise, the introduction and assessment of IBRs by HMRC will mean separate requests by companies with a single parent may be grouped together and treated as one.

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What happens if I just withhold payment from HMRC?

Aside from the legal implications (for instance, money laundering regulation) for all parties there may be personal implications for the directors as they could be seen to be trading insolvently. Time to Pay also requires time to plan and approaching HMRC on the 19th of the month for a deferral is unlikely to be received warmly.

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How soon should we approach HMRC to discuss deferring our tax payment?

We always advocate early, open dialogue with stakeholders that encourages trust. Being hesitant about delivering 'bad news' is natural, and we can facilitate dialogue with HMRC, as well as other key stakeholders, and help you to prepare, draft and present robust information to address concerns. If discussions on a Time to Pay arrangement commence before the due date for payment, HMRC will not apply surcharges and similarly it will not affect gross payment status for businesses within the construction industry.
 

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