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HMRC internal manual

Debt Management and Banking Manual

Time To Pay: reviewing proposals: are the proposals reasonable?

When considering if the proposals are reasonable you should consider the information against other customer information that you have. Is the information you have been given consistent with

  • Previous information that the customer has given you
  • Details on their returns

When considering whether proposals are reasonable you need to consider factors such as the size of debt relative to turnover or earnings. Generally the larger the debt in comparison to earnings/turnover then the longer it will take the customer to pay. You will also need to consider what assumptions the customer has made when working out how long they need to clear the debt.

If a business has said that they will be able to pay due to increased sales you need to consider how likely this is. Are there contracts in place for these new sales? Are the economic circumstances such that an increase in sales is likely? If they have reduced costs how have they done this and when will these reductions start? You must make sure that people haven’t been overly optimistic in their forecasts of their ability to pay. We don’t want a customer to make higher proposals then they can afford and then default on the arrangement by not paying their repayments or other HMRC liabilities.

At the same time we don’t want people to be requesting longer than they need to clear the debt and if someone has a high income/turnover relative to their debt we would expect them to be able to pay quickly. We would need to scrutinise other expenditure that the customer has. With businesses it is not unreasonable for HMRC to expect that a business is negotiating with other creditors and asking them for Time To Pay (TTP) as well. We would not expect a business to be purchasing assets, non-essential items or repaying loans to directors when they have a debt with HMRC.

With personal debt we shouldn’t refuse a TTP because a customer has committed to certain expenditure e.g. hire purchase. We should however suggest that when other payment commitments come to and end that they use the additional money to clear their arrears