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HMRC tax set off when a TTP is in place

HMRC have set off a VAT refund against unpaid tax being settled by a time to pay agreement

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Hello all, 

Client had an outstanding corporation tax debt. A time to pay agreement was set up and was being paid each month as agreed.

The client has been due a VAT refund. In advance of the VAT submission the client spoke with HMRC who noted that the refund would be processed without set off. Based on this, and note on the VAt file by HMRC cashflow for the month / wages set up.

Now, HMRC have offset the two, leaving a cashflow problem with little time to rearrange finances. 

I appreciate that HMRC do have set off ability, but the client feels more than a little aggrieved. No notice, and feels as though the whole point of the TTP was because they didn't have the money to settle the Corp tax in full. If HMRC unilaterally take the refund which is needed for day to day working capital without advance notice they question why have the TTP?

Does anyone have experience of overturning HMRC set off or know if discretion can be used?



Replies (3)

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By gillybean04
25th Nov 2021 11:10

While it is at their discretion, their DMBM80040 implies if you have a time to pay, they won't reverse it.

"If repayments of tax become due during the TTP period HMRC must offset these against the debt. HMRC cannot on the one hand allow TTP whilst at the same time issuing a repayment of tax

We can only agree TTP based on the customers means to pay and can’t base it on other factors. For instance, we can’t allow TTP on the basis that a business could invest this money to produce greater payments of tax in the future"

There is also a snippet in DMBM802020 which although in regards to repeat requests, indicates HMRCs approach to such circumstances and is along the same lines as the part above about only considering their means to pay and no other factors:

"Where this happens you shouldn’t refuse the TTP request just because the customer has had a previous TTP, but equally HMRC is not a source of working capital and customers cannot use HMRC as such. "

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Replying to gillybean04:
By jpg80
25th Nov 2021 12:07

Hello Gillybean, thanks.
I think I'm interpreting DMBM800400 differently. I'm reading that if there is a repayment of tax (eg VAT), HMRC must offset these against the debt (e.g. corp tax). No discretion. That's just the rules.
I've asked the client if they had a full contract for the TTP and they have said not. It was set up over the phone and being paid on time. The frustration is checking on the VAT refund position first, being reassured and then it being completely swept aside without any correspondence from HMRC that this would happen

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Replying to jpg80:
By gillybean04
25th Nov 2021 12:40

Sorry, perhaps I chose the wrong wording/didn't include all the info. DMBM405080 sets out that set off is at their discretion (and that it won't be reversed unless they agree to it, so also at their discretion) or the taxpayer's request.

So they do have discretion to repay amounts set off, just (according to the other manuals) they probably won't exercise it.

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