‘Time to pay’ woes

Since 2008 HM Revenue & Customs (HMRC) has provided the ‘Time to Pay' (TTP) scheme, a rapid response service to businesses that need more time to pay their tax liabilities.  Since then, the qualifying conditions for TTP have been tightened up considerably.

Sometimes the guidelines for this scheme are misunderstood, leading to businesses being refused a TTP arrangement when one should otherwise have been granted.  There is a myth that TTP cannot cover Pay As You Earn (PAYE) liabilities; in fact it can.  If the PAYE due is less than £10,000 and it can be paid within 12 months, HMRC should grant TTP.  Larger debts or longer payment periods will be referred to a senior HMRC officer.

If the PAYE liability relates to the 2010/11 tax year, there could be a penalty for late payment.  Unfortunately, the PAYE computer that issues penalty warning letters does not record that a TTP arrangement has been set up.

Do not ignore a warning letter, because you may have to pay the penalty if you cannot meet your agreed instalment plan under your TTP arrangement.  Reply to the warning letter, setting out:

• The date you requested TTP.
• The PAYE months included in the arrangement.
• The agreed payment amounts and dates.

All contractors in the construction industry scheme (CIS) have their tax records regularly reviewed to see if they still qualify for gross payment status.  If the CIS computer finds that you have failed to pay your tax on time, your gross payment status is withdrawn.  The CIS computer will not know if you have a TTP arrangement, so any late payment of tax will be marked as a failure.  You need to appeal in writing within 30 days against the withdrawal of gross payment status, and your appeal should include all the details of your TTP arrangement, as listed above.

Another problem with TTP is caused by the debt management computer in the Tax Collector's office.  This computer has been known to issue distraint (or in Scotland ‘poinding') notices to businesses that have agreed TTP for their tax debits.  If you receive a distraint or poinding notice you need to take action immediately, or you could have your goods seized by a bailiff or Sheriff's Officer.  Please contact us without delay if any of the above situations apply to you.

Till debt do us part - Debt Management advice guide

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In January this year, the BBC reported that five million people, which equates to 1 in 10 adults, spend more than they earn each month, according to figures compiled by the financial comparison website uSwitch.com. Overdrafts and credit cards generally provide the funds to enable these individuals to spend beyond their means. The number of credit cards issued has increased to 71 million from 36 million over the past 10 years. In a separate BBC article, more and more families are relying on 2 or more salaries to make ends meet. In fact, 51% of working families with more than one child feel that they are struggling to cope with increasing household bills and spiralling debt.

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HELP! Debts, Repossessions, IVA's and Bankruptcy.. what does it all mean?

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A debt is a sum of money owed from one person or institution to another person or institution and can be split into unsecured and secured debt.

Typically "unsecured" debts involve smaller amounts of money and consist of credit card debts, bank overdrafts and small loans for which you have not been asked to put up any security. The lender (bank, credit card company or other financial institution) cannot seize any of the borrower's possessions if the balance remains unpaid. However, they may engage the services of a collection agency or even a lawyer to recover the debt through the Courts.

Secured debt is money loaned against "collateral", which is usually a tangible asset such as your home or car. A legal charge is created over the asset. Examples of secured loans include mortgages or a car finance agreement. If the borrower doesn't keep up to date with the loan repayments, thus breaching the terms of the loan agreement, the lender can take possession of the asset and sell it in order to recover the loan amount outstanding.

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Advice guide - What debts can I include in an Individual Voluntary Arrangement (IVA)?

In order to advise you properly with regard to your debts and the options available to you to get yourself out of debt, your insolvency practitioner or other debt advisor will need information about all your creditors.

Your creditors may include the following:

Secured creditors - such as your mortgage provider or any creditor whose debt is secured on your home and/or any other assets;

Landlords - if you are tenant or rent a workshop, offices etc;

The Crown - typically tax owed to the HM Revenue & Customs;

Unsecured creditors - creditors without any security for their debts, such as credit cards, store cards, personal loans and bank overdrafts (if unsecured), amounts due to utility and phone companies, council tax. If you are in business it would also include most trade creditors;

Finance creditors - those creditors who provide assets on hire purchase or finance leases, for instance motor vehicles;

However, not all the above types of creditor are eligible for inclusion in an IVA proposal.

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