681,000 UK taxpayers forced to reschedule payments with HMRC

Publications that covered this story include: Investors Chronicle and City AM.
    • Loan Charge debts could have pushed some taxpayers to negotiate ‘Time to Pay’ agreements with HMRC
    • Hidden debt crisis

681,000 UK individuals and businesses are so far behind on their tax bills that they have been forced to reschedule their payments with HMRC, our research shows.

Taxpayers are able to reschedule their tax payments with HMRC by agreeing ‘Time to Pay’ arrangements. These allow taxpayers to pay their taxes over a longer period of time, but can be extremely difficult to negotiate.

Our research shows that the Brexit-related and broader slowdown of the economy has put the finances of small businesses and individuals in a squeeze, making it harder for them to pay their tax bills. For example, the number of individuals entering insolvency has risen by 14% to 121,700 in the last year alone.**

HMRC’s controversial “Loan Charge” is also likely to have caused a surge in the number of taxpayers forced to ask negotiate ‘Time to Pay’ arrangements with HMRC. The Loan Charge was introduced by HMRC earlier this year to effectively claw back up to 20 years’ worth of tax it believes it is owed by individuals who used disguised remuneration schemes.

The Loan Charge, which is now under review by the Government, forces those with outstanding debts to pay all the outstanding tax in one lump sum. That tax bill will be unaffordable to many of those taxpayers.

Clive Gawthorpe, tax partner at our Manchester office, says: “With the economy putting both small businesses and personal taxpayers under so much pressure it’s no surprise that people are struggling with their tax bills.

“What is surprising is it that it is now affecting more than half a million taxpayers.

“However, Time to Pay arrangements remain notoriously difficult to agree with HMRC. Even when HMRC does agree them, they usually only last for one year. Many people need more time than that.”

Our experience shows, however, that HMRC should be applauded for being more reasonable with taxpayers affected by the Loan Charge. We have seen some instances of HMRC agreeing to payment plans of up to three years for some of those individuals.

Clive Gawthorpe continues: “There are some areas where HMRC is being more accommodating, but that does not mean an agreement is guaranteed in any circumstance. People must be aware that these arrangements can take time to negotiate, so approaching the Revenue sooner rather than later is likely to be the best tactic.”

* HMRC data, number of taxpayers in Time to Pay arrangements with HMRC, June 2019, latest data available
** Insolvency Service statistics, year to June 30