HMRC Time to Pay Arrangement: A Guide for Limited Company Directors

Time to Pay, often shortened to TTP, is an agreement between HMRC and a taxpayer or business that cannot pay a tax liability in full by its due date.

Instead of demanding immediate payment of the entire debt, HMRC may agree to receive instalments over an affordable period.

HMRC describes TTP as a means of allowing viable customers who cannot pay on the due date to make payments over a period they can afford.

For limited companies, a Time to Pay arrangement may potentially be used for liabilities such as:

• PAYE and National Insurance;
• VAT;
• Corporation Tax;
• Construction Industry Scheme liabilities; and
• other qualifying HMRC debts.

The exact arrangement depends on the company’s circumstances.

Time to Pay is principally designed for a business that has a temporary inability to pay, rather than one with no realistic prospect of repaying its debts.

A company may be a suitable candidate where:

• the underlying business remains viable;
• there is a clear reason for the cash-flow shortage;
• the company can afford regular repayments;
• current and future taxes can still be paid; and
• the debt can realistically be cleared.

HMRC’s own guidance says a customer must have the means to make the agreed payments, the means to pay other tax liabilities that arise during the arrangement, and the repayment period should be as short as possible.

That distinction is important.

If a company agrees a payment plan for £30,000 of historic PAYE debt but immediately begins building another PAYE liability, the TTP has not addressed the underlying financial problem.

HMRC will look at whether the proposed arrangement provides a realistic route to clearing the debt.

Factors can include:

• the amount owed;
• why the debt arose;
• the company’s income and expenditure;
• available cash and assets;
• current trading performance;
• other debts and financial commitments;
• whether tax returns are up to date;
• the company’s ability to pay future tax bills; and
• how much the company can genuinely afford each month.

HMRC uses income and expenditure information to determine disposable income and assess the customer’s ability to repay the debt.

For companies, this means directors should have a clear understanding of their financial position before approaching HMRC.

The detailed application process is covered separately in our guide to how to apply for HMRC Time to Pay.

At a high level, directors should normally be ready to explain:

1. how much the company owes;
2. why the tax cannot be paid in full;
3. what the company can afford to pay immediately;
4. what monthly repayment is affordable;
5. how long it would take to clear the balance; and
6. how the company will keep future taxes up to date.

It is usually helpful to prepare a realistic cash-flow forecast before approaching HMRC.

The goal is not simply to secure the lowest possible monthly payment.

It is to propose an arrangement that the business can actually maintain.

Once the agreement is in place, the company must comply with its terms.

That means:

• making instalments when agreed;
• submitting required tax returns;
• paying new liabilities on time; and
• contacting HMRC if circumstances materially improve or deteriorate.

HMRC’s current guidance states that arrangements may be cancelled where payments are missed or made late, where future liabilities are not paid, or where the customer’s ability to pay improves and HMRC is not informed.

So a TTP arrangement should not be viewed as the end of the issue.

Directors still need to monitor cash flow carefully throughout the repayment period.

Yes.

HMRC is not required to accept every proposal.

A request may be difficult to agree where:

• the company cannot demonstrate how it will afford repayments;
• future taxes are likely to go unpaid;
• the proposal would take an unreasonable time to clear;
• directors have not provided sufficient information;
• the company has repeatedly broken previous arrangements; or
• HMRC considers the business to be fundamentally unable to meet its liabilities.

If a proposed monthly payment is unaffordable, directors should not agree to it simply to delay enforcement.

An unrealistic TTP often makes matters worse by consuming cash while the company continues creating new debt.

Where an agreed arrangement is being maintained, its purpose is to provide an agreed route for HMRC to recover the debt.

However, a request for Time to Pay does not automatically prevent enforcement in every circumstance, particularly where enforcement action has already begun.

HMRC’s guidance confirms that requests can be considered at different stages of debt management, but additional considerations apply once enforcement proceedings are underway.

If HMRC has already begun serious recovery action, directors should act quickly.

Related guides include:

• HMRC debt collection agencies
• HMRC bailiffs: what are your rights?
• Can HMRC liquidate a company?

This is perhaps the most important question for directors.

A TTP arrangement can solve a cash-flow timing problem.

It cannot make an fundamentally unviable company solvent.

Warning signs that something more substantial may be required include:

• PAYE or VAT arrears continuing to increase;
• suppliers also going unpaid;
• repeated overdraft pressure;
• borrowing being used to meet routine tax payments;
• missed TTP instalments;
• several creditors taking enforcement action; or
• forecasts showing no realistic route back to positive cash flow.

If the company cannot afford both historic HMRC debt and ongoing liabilities, directors should assess the broader position before entering another repayment agreement.

For a full overview, see our HMRC tax debt guide.