If you cannot pay your tax bill on time

If you cannot pay your tax bill on time

Let’s face it, there are times when we want to do the right thing, like pay our tax bill on time, but we haven’t got the cash available. This could be because of unexpected business activity or poor planning on our part.  


Nevertheless, cash is the oxygen the business needs to survive and when faced with cash constraints, usually the tax bill is the last one to get paid. This can have negative consequences like HM Revenue & Customs imposing late payment penalties and/or late payment interest on unpaid amounts. 


If you cannot pay your tax bill on time, you should contact HM Revenue and Customs (HMRC) as soon as possible.


This is especially true if you: 

  • Have missed a tax deadline 
  • Know you will not be able to pay a tax bill on time 
  • If you cannot pay your tax bill in full, you may be able to set up a payment plan to pay it in instalments. This is called a ‘Time to Pay’ arrangement.  


You will not be able to set up a payment plan if HMRC does not think you will keep up with the repayments. If HMRC cannot agree a payment plan with you, they’ll ask you to pay the amount you owe in full.  


Setting up a payment plan 


You may be able to set up a payment plan online, depending on which type of tax you owe and how much you owe. 


To set up a payment plan you’ll need: 

  • Access to your HMRC Business Tax Account 
  • The relevant reference number for the tax you cannot pay, such as your unique tax reference number 
  • Your bank account details 
  • Details of any previous payments you’ve missed 
  • If you owe tax from Self Assessment 


You can set up a  Self Assessment payment plan online if you: 

  • Have filed your latest tax return 
  • Owe less than £30,000 
  • Are within 60 days of the payment deadline 
  • Do not have any other payment plans or debts with HMRC 


If you owe employers’ PAYE contributions 


You can set up an employers’ PAYE payment plan online if you: 

  • Owe less than £15,000 
  • Are within 35 days of the payment deadline 
  • Plan to pay your debt off within the next 6 months 
  • Do not have any other payment plans or debts with HMRC have submitted any employers’ PAYE submissions and Construction Industry Scheme (CIS) returns that are due 


If you cannot set up a payment plan online, you’ll need to contact HMRC’s Payment Support Service on 0300 200 3835  


They will ask you: 

  • If you can pay in full 
  • How much you can repay each month if there are other taxes you need to pay 
  • How much money you earn 
  • How much you usually spend each month 
  • What savings or investments you have 


If you have savings or assets, HMRC will expect you to use these to reduce your debt as much as possible. If you’ve received independent debt advice, for example from Citizens Advice, you may have a ‘Standard Financial Statement’.


HMRC will accept this as evidence of what you earn and spend each month. 


If your company is in tax debt 


HMRC will ask you to propose how you’ll pay your tax bill as quickly as you can. They will ask questions about your proposal to make sure it is realistic and affordable for you. 


You must reduce your debt as much as possible before setting up a payment plan. You can do this by releasing assets like stock, vehicles and shares. 


HMRC may ask company directors to: 

  • Put personal funds into the business 
  • Accept lending 
  • Extend credit 


Remember, if you cannot pay your tax bill on time, you may have a cashflow problem which needs to be addressed. Do not put this off. Creating a payment plan is like sticking a plaster on a gushing wound.  


You need to address the cause of the problem so that it does not recur. 


Contact us for more information on resolving your cash flow problem.