HMRC Time to Pay
If your company cannot pay an HMRC bill in full, HMRC may agree to let you repay the arrears by instalments through a Time to Pay arrangement.
For the right business, this can be an effective solution.
But Time to Pay only works if the company can afford the instalments and keep paying its new tax liabilities as they arise.
If the company is still building up fresh VAT or PAYE every month, another payment plan may simply postpone a larger insolvency problem.
What is HMRC Time to Pay?
Time to Pay is HMRC’s term for allowing an overdue tax liability to be paid over an agreed period rather than immediately in one lump sum.
The company normally makes regular instalments until the arrears are cleared.
It is not a write-off of tax and it does not reduce the underlying debt simply because the company is struggling.
Interest can continue to increase the total amount paid, so HMRC expects arrears to be cleared as quickly as the company can reasonably afford.
When is Time to Pay a good solution?
Usually where the underlying business is viable but has a temporary cash-flow problem.
For example:
- A major customer paid late
- The company suffered a short-term trading setback
- A large unexpected cost disrupted cash flow
- The company has returned to profitability
- Historic tax debt can be cleared from future trading
The strongest proposal is one where the company can show that the problem which created the arrears has been dealt with.
What does HMRC want to see?
HMRC wants to know that the proposal is realistic and affordable.
For company tax debt, expect questions about:
- The amount owed
- Company income
- Normal monthly spending
- Other taxes due
- What the company can afford each month
- Business assets
- Available finance
- Why the tax was not paid
- How the company will avoid falling behind again
HMRC’s current guidance specifically says that, where a company owes tax, it will ask questions to make sure the proposal is realistic and affordable.
How much will HMRC expect each month?
There is no single monthly percentage that applies to every company.
The payment needs to be based on what the business can genuinely afford after meeting necessary ongoing costs.
But HMRC will not normally want the company deliberately keeping surplus cash while tax arrears remain unpaid.
The aim is to clear the debt in the shortest realistic period without setting the arrangement up to fail.
How long can a Time to Pay arrangement last?
There is no single standard term that applies to every case.
The period depends on:
- How much is owed
- What the company can afford
- The company’s wider financial position
- The tax involved
- The credibility of the proposal
HMRC’s published guidance does not impose one universal maximum period, but its internal policy is that Time to Pay should be as short as possible.
Do not therefore build a rescue plan around the assumption that HMRC will automatically give the company several years.
Do new taxes still have to be paid?
Yes. This is one of the most important points.
HMRC’s own Time to Pay policy says the company must have the means to:
- Make the agreed instalments; and
- Pay other tax liabilities that fall due during the arrangement
So if the company agrees £4,000 per month towards old PAYE but then cannot pay its new VAT bill, the underlying problem has not been solved.
A Time to Pay arrangement should reduce tax arrears, not create a cycle where old debt falls while new debt rises.
Will HMRC expect the company to sell assets?
Possibly.
HMRC’s current guidance says that a company in tax debt should reduce the debt as much as possible before setting up a payment plan.
It specifically refers to releasing value from assets such as:
- Stock
- Vehicles
- Shares
- Other available business assets
That does not mean the company should sell essential equipment that destroys its ability to trade merely to produce an immediate payment.
The commercial impact needs to be considered.
Will HMRC ask directors to put in personal money?
It may ask.
HMRC’s current guidance expressly says that it may ask company directors to consider:
- Putting personal funds into the business
- Accepting lending
- Extending credit
That does not mean you are automatically personally liable for the company’s tax.
Before putting personal savings into an insolvent company, ask whether the money is genuinely funding a recovery or simply postponing liquidation.
Do I need all the company’s accounts finished before speaking to HMRC?
No, but you do need enough information to make a credible proposal.
Useful information includes:
- Total HMRC arrears
- Which taxes are owed
- Recent bank balances
- Expected receipts
- Normal monthly operating costs
- Wages
- Rent
- Other debt repayments
- Future VAT, PAYE and Corporation Tax dates
A simple realistic cash-flow forecast is often more useful than an optimistic plan based on hoped-for sales.
Should tax returns be up to date first?
Where possible, yes.
If returns are missing, neither the company nor HMRC may have a clear picture of the actual liability.
Bring outstanding returns up to date as part of preparing the proposal, unless there is an immediate enforcement issue that means advice is needed first.
Can I arrange Time to Pay online?
Some taxpayers and liabilities can use HMRC’s online payment-plan service.
Where the company does not qualify for the online route, HMRC can be contacted directly to discuss a proposal.
Eligibility rules for online arrangements can change, so check the current HMRC service rather than relying on an old threshold found elsewhere online.
What if HMRC refuses my proposal?
First understand why.
Common problems can include:
- The proposed instalment is too low
- The arrangement would last too long
- The company cannot pay future taxes
- Returns are missing
- The company has assets or finance that HMRC expects it to use
- A previous arrangement failed
- The business does not appear viable
If a better proposal can genuinely be made, there may still be scope for discussion.
If the company simply cannot afford a credible arrangement, that is important information in itself.
What if I already have a Time to Pay arrangement and cannot keep it?
Contact HMRC rather than allowing the arrangement to fail without explanation.
HMRC’s current guidance says it may try to rearrange or renegotiate payments where circumstances change.
But repeated failed arrangements are often a warning that the company cannot support its existing debt.
If the company cannot pay the Time to Pay instalment and its current taxes, take insolvency advice rather than simply asking for another extension.
Will HMRC stop enforcement if Time to Pay is agreed?
An agreed and maintained arrangement should deal with the liabilities covered by it on the agreed terms.
But do not assume that simply asking for Time to Pay automatically stops enforcement that is already under way.
If sheriff officers, a bank arrestment or a winding-up petition are already involved, tell HMRC and your adviser exactly what stage has been reached.
When is Time to Pay probably not enough?
Be cautious where:
- New tax debt is still building up
- The company cannot make payroll
- Suppliers are seriously overdue
- Several previous HMRC arrangements have failed
- The business is consistently loss-making
- Directors are repeatedly funding normal trading personally
- The proposed instalment only works if sales increase dramatically
- There is no realistic working-capital solution
In that situation, Time to Pay may delay rather than solve the problem.
What are the alternatives if Time to Pay will not work?
The right alternative depends on whether the company can still be rescued.
Possibilities may include:
- Informal negotiations with creditors
- New finance or investment
- Sale of non-essential assets
- A Company Voluntary Arrangement
- Administration in an appropriate case
- A Creditors’ Voluntary Liquidation if the business cannot realistically recover
The important thing is not to continue adding tax debt while waiting for a solution that is unlikely to arrive.
What should I do before calling HMRC?
- Confirm what is owed.
- Make sure you understand the next tax liabilities due.
- Work out a genuinely affordable monthly figure.
- Prepare a simple cash-flow forecast.
- Identify any assets or funding available.
- Understand why the arrears arose.
- Do not offer a payment merely because you think HMRC wants to hear a higher number.
A realistic proposal is much more useful than an ambitious one that fails after two months.
HMRC Time to Pay FAQs
Can a limited company get HMRC Time to Pay?
Potentially. HMRC can agree payment of overdue company tax by instalments where it considers the proposal realistic and affordable.
How long will HMRC give me?
There is no single standard period. HMRC expects the debt to be cleared in the shortest period the company can realistically afford.
Can I include VAT and PAYE?
Time to Pay can potentially apply to overdue HMRC liabilities, depending on the particular debt and circumstances.
Do I still need to pay new taxes?
Yes. The company needs to be able to meet both the agreed instalments and tax liabilities falling due during the arrangement.
Will HMRC ask me to use personal savings?
It may ask directors to consider supporting the company, but company tax does not automatically become a director’s personal liability simply because HMRC asks the question.
Can HMRC change the arrangement later?
Potentially. HMRC says repayment terms may be reviewed where circumstances change. Contact HMRC before simply missing an agreed payment.
What if the company cannot afford Time to Pay?
If the company cannot afford both historic tax repayments and new liabilities, its wider solvency should be reviewed and restructuring or liquidation may need to be considered.
Thinking about asking HMRC for Time to Pay?
We can help you assess whether a payment arrangement is a genuine solution before you commit the company to instalments it cannot afford.
If Time to Pay is viable, the objective is a plan that clears the historic tax while keeping the company up to date going forward.
If the figures show that this is not possible, it is better to recognise that early and consider the alternatives.