18 Aug, 2011

Menzies comment on HMRC turning down Time to Pay (TTP) applications and how this may be applied to legal practices.


HM Revenue & Customs (HMRC) is turning down Time to Pay (TTP) applications from companies that use dividends as a form of remuneration. Peter Noyce, legal partner at accountancy firm, Menzies, commented: “TTP arrangements allow businesses which cannot pay on the due date to make payments over a period that they can afford. Until recently, HMRC has agreed to around 95 per cent of applications but its criteria have become more stringent this year and they have stated that, in essence, if a company has spare cash to make non-contractual payments to shareholders, then it can pay at least part of its debts.


“So how could this be applied to legal partnerships? A partner’s drawings are non-contractual but it would seem harsh that someone who has already put capital in to a firm cannot draw a level of drawings commensurate to their likely earnings. As always, management information within the practice should be used to support the level of drawings and, perhaps, this should be robust enough to share with HMRC to satisfy them of the need for a TTP.


“Previously HMRC was flexible and, to its credit, very helpful on TTP for many firms. However, this year has seen a less sympathetic, less flexible approach. HMRC will start coming down harder and refuse applications.


“Therefore, ensure that your business has prepared for its call with HMRC to request a TTP whether it is for PAYE or VAT, and also use the experience of your professional advisers as often they can then take proactive approach to managing your cash, acting like a virtual finance director. Finally, generally best to call HMRC before the tax is actually overdue.”


Menzies LLP is one of the UK’s largest regional firms of accountants and advisers to privately owned businesses. It operates from seven offices in London and the South East and its services include accounting, audit, corporate tax, corporate finance, private client, outsourcing and payroll.

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