Filter news by:

Calling time on Time to Pay? FRP Advisory reviews recent HMRC guidance

Author: Glyn Mummery
14 July 2011

HM Revenue & Customs (HMRC) has provided further comment on Time to Pay (TTP) arrangements, saying that TTP will no longer be available where companies are paying out dividends to shareholders.  HMRC’s view is that the money should be used to pay tax, before paying dividends the company is unable to afford.

This is almost certainly going to hit hard those companies whose directors have expressed a wish to receive payments as a dividend, rather than a salary. 

What does the HMRC guidance mean?  Ultimately, as an example, where one company has a TTP arrangement in place, and another doesn’t, the same two businesses will receive different levels of support from HMRC, merely because of the way in which their directors have chosen to receive income from the company. 

From a commercial perspective, is this fair?  It is going to be hard to argue against the stance taken by HMRC of not paying dividends, where the company is unable to meet its operating costs. 

What about those companies who do not operate a dividend policy?  Excessive remuneration will, most certainly, act as a barrier.  However, on a positive note, HMRC will consider each application and establish whether the directors’ remuneration level is appropriate, taking into account the company’s financial concerns.  Of course, if they are not happy, then TTP will not be accepted.

Glyn Mummery, partner at FRP Advisory, a leading UK restructuring, recovery and insolvency firm, comments: “A number of recent cases we’ve handled recently have involved companies with a TTP arrangement, which they’ve either been unable to meet, or where they have had to seek a renegotiation.

“The stance that HMRC appears to be taking is that, once a TTP arrangement has failed, there is no basis for renegotiation. Consequently, they seem to be issuing winding up petitions for the full amount of the debt owed - enforcing these, unless payment in full is made. We’ve seen a number of companies who’s been unable to pay the debt and have, therefore, had to enter into administration, to protect the business and assets.”

The direction of HMRC’s policy with regards to TTP is now very clear.  Yes, they are still available, but in much stricter circumstances! 

It’s important to seek professional advice early, before applying for TTP. Your adviser will be able to assist with the following:

• The preparation and application for TTP
• Where a TTP has been refused
• Where a TTP is currently in place but default has or is likely to happen

If you would like to discuss TTP in further detail, please do not hesitate to contact Glyn Mummery on 01708 458211 or a member of your FRP Advisory team. Alternatively, please contact us using the online form below.

Press contacts

Kate Macnamara
Grayling
Tel:   +44 (0)121 265 2761
Mobile: +44 (0)771 422 2793