penalties

How would I apply for a Time to Pay arrangement: what HMRC asks for and how it affects penalties

admin

Here’s a clear, practical walkthrough of how to set up a Time to Pay (TTP) arrangement with HMRC and what it means for your Self Assessment liability

Time to Pay (TTP) — What It Is

A Time to Pay arrangement lets you spread your Self Assessment tax bill over affordable monthly instalments if you can’t pay it in full by the deadline.

It’s not automatic — you must apply, but HMRC routinely agrees if:

  • You have a good compliance history,
  • The tax debt is temporary (e.g., cash flow issues), and
  • You show that you can keep up with the new payment plan.

Example: Your Case

You owe £1,500 (balancing payment) for 2024/25, due 31 January 2026.
You can’t pay the full amount but could manage £250/month.

You can ask HMRC for a 6-month Time to Pay plan from February to July 2026.

How to Apply

 Online (fastest)

If your circumstances are straightforward, you can do it online:

  • Log into your HMRC online account
  • Select “Set up a payment plan”
  • You can usually do this within 60 days of the payment deadline
  • Must owe < £30,000, have no other payment plans, and your tax returns must be up to date

 HMRC will:

  • Approve automatically (no phone call needed)
  • Confirm the monthly amount and end date
  • Begin collecting payments by Direct Debit

By phone (complex cases)

Call the Self Assessment Payment Helpline:
 0300 200 3822
(Open Monday–Friday, 8am–6pm)

Have ready:

  • Your UTR (Unique Taxpayer Reference)
  • The amount you owe and what you can pay upfront
  • A monthly payment proposal
  • Basic info about your income, outgoings, and savings

HMRC will assess affordability and agree a reasonable plan.

How It Affects Interest & Penalties

TypeWhat happens under TTP
InterestContinues to accrue until the debt is cleared, at the usual HMRC rate (e.g., 7.75%)
Late payment penaltiesPaused once the arrangement is agreed and you stick to it
New penaltiesNone added as long as you keep up payments
DefaultingIf you miss a payment, HMRC can cancel the plan and restart penalties

Example Outcome

You agree to pay £1,500 in 6 instalments of £250 starting 28 Feb 2026.
Interest over 6 months at 7.75% ≈ £44.

Total payable = £1,544 spread over 6 months.

As long as you:

  • Make each payment on time, and
  • File future returns and payments promptly,

No late payment penalties are applied.

Tips for a Successful Plan

  • Offer to pay something upfront (even 10–20%) — HMRC views this positively.
  • Be realistic — it’s better to propose a smaller, sustainable amount than to miss a payment.
  • If your income changes, you can amend the plan by contacting HMRC early.
  • Keep a record of every conversation or confirmation email.

How HMRC calculates the interest during a Time to Pay plan (with the month-by-month breakdown)

Let’s walk through a month-by-month example showing how HMRC calculates interest under a Time to Pay (TTP) arrangement for your Self Assessment balance

Example: Interest During a Time to Pay Arrangement

Scenario

ItemDetails
Tax owed£1,500 (2024/25 balancing payment)
Due date31 January 2026
TTP agreed6 monthly instalments of £250 starting 28 February 2026
HMRC interest rate7.75% per year (Bank of England base + 2.5%)

⚙️ How HMRC Works It Out

  • Interest is charged daily on the remaining unpaid balance.
  • Each time you make a payment, the outstanding balance drops, and daily interest thereafter is calculated on the reduced amount.
  • The formula HMRC uses is:
    [
    \text{Interest} = \text{Balance} × \text{Rate} × \frac{\text{Days outstanding}}{365}
    ]

Payment Plan & Interest Breakdown

MonthPayment dateBalance before paymentDays interest chargedInterest this periodNew balance
Feb 202628 Feb£1,50028 days£1,500 × 7.75% × 28/365 = £8.91£1,250
Mar 202631 Mar£1,25031 days£1,250 × 7.75% × 31/365 = £8.23£1,000
Apr 202630 Apr£1,00030 days£1,000 × 7.75% × 30/365 = £6.37£750
May 202631 May£75031 days£750 × 7.75% × 31/365 = £4.93£500
Jun 202630 Jun£50030 days£500 × 7.75% × 30/365 = £3.18£250
Jul 202631 Jul£25031 days£250 × 7.75% × 31/365 = £1.64£0

🧾 Total Interest Charged

Add the six interest amounts:

[£8.91 + £8.23 + £6.37 + £4.93 + £3.18 + £1.64 = £33.26]

Total interest = £33.26

So your total cost over 6 months is:

[£1,500 + £33.26 = £1,533.26]

Key Points

  • HMRC calculates interest up to the date each instalment is paid.
  • If you pay earlier, interest stops on that amount — so you save money.
  • If you miss or delay a payment, HMRC recalculates interest on the full balance again and may cancel the TTP.

How does HMRC process appeals from partnerships?

admin

Partnership appeals have specific procedures that differ significantly from individual appeals. Here’s how HMRC handles them:

Who Can Make Partnership Appeals

Strict Authority Requirements:

  • Must be made by the nominated partner on behalf of all relevant partners
  • OR by an authorized agent acting for the partnership/nominated partner
  • Appeals from non-nominated partners will be refused
  • Tribunals may reject appeals not made by the nominated partner

Verification Process: If it’s unclear who the nominated partner is, HMRC will:

  • Issue SEES form SA670 to confirm the nominated partner’s name
  • Make a Free Format Note on the Partnership record noting either:
    • “DD/MM/YY SA670 received. Nominated partner is [name]”
    • “YY/YY box 11.3 shows nominated partner as [name]”

Alternative Acceptance: Appeals can be accepted from:

  • Partner shown in box 11.3 on internet-filed returns (current or previous year)
  • Person who signed the paper return (if box 11.3 is empty)
  • Agent acting for all partners (though verification may be needed for large partnerships)

Special Circumstances

Death of Nominated Partner:

  • Successor is generally the person nominated by majority of other partners
  • Must include personal representative of deceased partner in the majority
  • SEES form SA670 must be issued to confirm new nominated partner

Agent Representation:

  • Can accept from agent acting for all partners
  • For large partnerships (hundreds of partners), practical verification may not be possible
  • Issue SA670 to confirm nominated partner details

System Recording Process

Unique Aspects for Partnerships:

  1. Record Location:
    • Appeal recorded only on partnership record
    • Do NOT record on individual partner records
    • Use penalty imposition date as charge creation date (may need to check partner records to find this)
  2. Standover Procedures:
    • Informal standover penalty in full on each individual partner’s record
    • Note work list items: “Working with Partnership, responsible office and UTR”
    • Not necessary to record appeal on individual partner records
  3. Cross-Reference Management:
    • Partner records should note any work list items
    • Include reference to partnership responsible office
    • Maintain clear audit trail between partnership and individual records

Settlement Process

When Appeal is Settled:

  1. Update Individual Records:
    • Where possible, update each individual partner’s record
    • Reduce standovers to nil
    • If direct updating not possible, inform responsible office for each partner
  2. Tribunal Considerations:
    • Ensure tribunal understands they’re considering penalties on all partner records
    • Provide clear documentation of all affected partners
  3. Communication:
    • Notify all relevant offices of settlement outcome
    • Ensure consistent treatment across all partner records

Penalty Application Rules

Late Filing Penalties:

  • All partners charged if partnership return not filed by due date
  • Appeals must go through nominated partner
  • Try to settle immediately if possible

Processing Approach:

  • Handle through partnership record using nominated partner authority
  • Apply informal standovers to individual partner penalties
  • Maintain coordination between partnership and individual records

Administrative Notes

Work List Management:

  • Appeals appear on partnership work list
  • Individual partner standovers noted separately
  • Cross-referencing essential for tracking

Documentation:

  • Retain clear records of nominated partner status
  • Document any changes in partnership composition
  • Maintain audit trail for tribunal purposes

Quality Control:

  • Regular review to ensure all partner records updated
  • Coordinate between multiple responsible offices if needed
  • Monitor for prompt settlement across all affected records

This partnership-specific process ensures that while the appeal is centrally managed through the nominated partner, the practical effects (like standovers) are properly applied to all affected individual partner records, maintaining both legal compliance and administrative efficiency.