A record high number of taxpayers have rescheduled their tax payments with HM Revenues and Customs (HMRC) this year, law firm Pinsent Masons found. Its figures show that approximately 864,400 taxpayers are now in Time to Pay arrangements with HMRC, up a staggering 38 percent from 647,770 people a year ago and 600 percent more than those who couldn’t pay after the global financial crisis of 2007 and 2009.
This equates to £100billion in overdue tax which is yet to be covered by Time to Pay arrangements.
It’s a result of many individuals and businesses struggling to pay their tax bills during COVID-19 when many small businesses were forced to temporarily close and several self-employed workers lost contracts and clients.
To help with financial difficulties, taxpayers have been allowed to delay the repayment of their overdue tax bills through Time to Pay arrangements.
Staggering the payments, usually over a 12-month period, has been essential for some businesses, helping them to stay afloat and resulting in less redundancies.
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Sam Wardleworth, Associate at Pinsent Masons, said: “The figures show that hundreds of thousands of additional taxpayers have sought a Time to Pay arrangement.
“Undoubtedly, Covid-related disruption has increased pressure on paying tax bills and taxpayers are making the most of HMRC’s flexibility in this area.”
Taxpayers can delay the repayment of their overdue tax bills which involves staggering the payments, usually over a 12-month period.
In some cases, workers just need to fill in a simple online application but for higher debts more extensive evidence is usually asked for.
“For most taxpayers, difficulties in agreeing a Time to Pay arrangement typically arise when they fail to approach HMRC quickly enough or the tax debt is of a higher value,” Mr Wardleworth said.
“In those circumstances, taxpayers may find themselves subject to a more rigorous application process which requires more thoughtful navigation.
“HMRC’s more lenient approach will inevitably taper off once the economy starts to show signs of recovery from the impact of COVID.”
Pinsent Masons says anyone who is concerned they will not be able to pay their tax bill on time should get in touch with HMRC as soon as possible, before they start incurring penalties.
HMRC can take enforcement action in cases where taxpayers do not pay their tax bill on time and fail to set up a Time to Pay arrangement.
This includes using third-party debt collection agencies and seizing and selling a taxpayer’s assets to settle the debt.
However, Time to Pay arrangements are beneficial for both HMRC and the taxpayer, as HMRC may get a higher percentage of tax owed plus interest, than if they had put the taxpayer through an insolvency process.
So it’s definitely worth taxpayers contacting the HMRC to see if they can clear the debt in affordable instalments.