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HMRC internal manual

Debt Management and Banking Manual

Time To Pay: reviewing proposals: assets

Assets available

When the customer has assets that can easily be converted into cash we would expect them to use these to pay their debt, but you shouldn’t necessarily refuse Time To Pay (TTP) because a customer has assets.

Savings/cash in bank accounts

When there are savings in a bank account we would expect the customer to use this money to settle the debt, even when there is a penalty for early withdrawal.

If they cannot get the money without giving a period of notice you should take this into account when considering the arrangement and allow instalments to be paid until the money can be withdrawn and paid to us.

Where a business has cash in their bank account (or available overdraft) we would expect them to use this to clear their debt. However you must be careful when considering the cash that a business has in the bank at any one time as their closing bank balance at the end of one period may be very different to that at the end of another period and there may not actually be any extra money available.

PEPs, ISAs, Stocks, Shares, Bonds and Savings certificates

Where the value of these assets would make a significant contribution to the debt owed ask the customer to realise these assets to settle their debt. It may take time for the asset to be realised and you should consider an interim arrangement until payment can be made to us.

Life insurance or endowment policy

If the policy is due to mature during the timescale of the TTP ask the customer to pay the money from the policy when it is cashed. If the policy will not mature for some time, suggest that the policy is cashed, but you cannot insist that this is a condition of a TTP.

Personal possessions/business assets

We would not normally expect someone to sell a valuable item to pay a relatively small debt which we could collect through a short TTP agreement. However, if there is a poor compliance history or they require a longer period to pay their debt (over three months), we should consider whether it is appropriate for them to sell their assets to pay their debt, or whether we should take enforcement action to secure payment of the debt.

Also, we would not normally expect a business to sell assets that are essential for the running of the business to pay debts that could be collected through a short TTP arrangement. In some cases we may ask the business to explore raising finance against these assets if they are requesting a longer term TTP, and in others it will be appropriate to take enforcement action to secure payment of the debt.

We should note details of any assets as this information could be important in the future if enforcement action needs to be taken.

Amounts owed to the taxpayer

If the customer is expecting payment of an amount owed to them you should ask the customer to settle their debt when they are paid this money. There may also be circumstances where you consider a solicitor’s undertaking when the sale of a property is imminent.

Director’s loans

Where a business has loaned money to shareholder directors we would normally expect this money to be repaid before TTP is considered. However, where you established that there is an outstanding director’s loan issue this should not automatically result in TTP being refused.

There are two possible directors’ loan scenarios; the director has:

  1. taken a loan from the company and it has not been repaid prior to the TTP request
  2. loaned money to the company and it is being repaid to the director in preference to paying HMRC debt.

In all cases, you should note:

  • the amount of the loan to or from the company
  • why the director either:
    • cannot repay this before requesting TTP or when it will be repaid
    • is being repaid in preference to paying the HMRC debt.

In cases where a Corporate Debt Questionnaire (CDQ) is to be completed, you should use your judgement based on all the information obtained in your in-depth discussion with the company to decide if TTP can be granted.

Where the director has borrowed from the company you should normally expect this to be repaid before agreeing TTP. However, such loans may not be ‘real’ loans; in other words, they may actually be a substitute for salary, which will be converted to salary at the year end. Consequently, if after discussion you accept that the loan cannot be repaid, you can still consider TTP and you do not have to automatically refuse the proposal. Instead, use your judgement to consider the TTP request, taking into account the usual considerations; for example, amount of debt involved, timescale requested and previous payment compliance.

Where you establish that the company is repaying directors’ loans in preference to paying off HMRC debts you should usually refuse any request for TTP on this basis but use your judgement based on timescales and amounts involved.