Since 3 August 2015, payment by direct debit is mandatory for Time to Pay arrangements. It is not HMRC’s intention to routinely revisit any existing non-direct debit agreements however, for any new agreements HMRC will expect the payment by direct debit.

HMRC has moved to direct debit by default for various reasons which they have outlined as follows:

• It is more cost effective and more secure than other payment methods.
• It removes the chance that the taxpayer will forget to make payment.
• Payments are more likely to be correctly allocated.
• Reduces the need for subsequent contact.
• Direct Debit scheme includes a guarantee to protect the taxpayer.

HMRC does recognise that there are exceptional circumstances where someone is unable to set up a direct debit, perhaps because their bank account will not allow it. In such cases payment by other methods may be agreed.

If you have clients who can’t pay their tax liabilities on time and need to request time to pay, you might want to make them aware of this and advise them to have bank details available ready to set up the direct debit.

HMRC will update their guidance in due course.