An HMRC Time to Pay arrangement is a formal agreement that lets a company pay tax it owes in instalments instead of as a single lump sum. It covers arrears such as VAT, PAYE, corporation tax and self-assessment, and is arranged directly with HMRC rather than through a court.
For a director looking at mounting tax arrears, a Time to Pay arrangement (often shortened to TTP) is usually the first thing worth understanding properly, because it can prevent enforcement action while the company catches up. It is not automatic and it is not guaranteed — HMRC assesses each request on the company's ability to pay and its compliance history.
This guide explains how a Time to Pay arrangement works, which taxes and companies typically qualify, how HMRC decides on instalment length, and what happens if a plan is refused or breaks down.
What a Time to Pay arrangement actually is
A Time to Pay arrangement is an informal but binding payment plan agreed between a company and HMRC. Instead of paying the full tax bill on the due date, the company pays an agreed amount each month until the debt, plus interest, is cleared.
It sits outside formal insolvency procedures. There is no court involvement, no public notice, and no appointment of an insolvency practitioner. HMRC simply agrees, in writing, to accept scheduled payments rather than pursuing the debt immediately.
- It is a concession, not a right — HMRC can refuse a request or set stricter terms.
- It typically pauses further enforcement action (such as debt collection calls or bailiff visits) while the plan is honoured.
- It does not reduce the amount owed; interest continues to accrue on the outstanding balance.
Which taxes and companies qualify
Most business tax debts can be included in a Time to Pay arrangement, including VAT, PAYE and National Insurance, corporation tax, and construction industry scheme deductions. HMRC can combine several tax types into a single monthly payment where that is practical.
Eligibility depends less on the type of tax and more on the company's circumstances. HMRC generally wants to see:
- A genuine, short-term cash flow problem rather than a structurally unaffordable business.
- A track record of filing returns on time, even if payment has fallen behind.
- A realistic proposal, usually based on management accounts or a cash flow forecast.
- No history of broken Time to Pay arrangements, where possible.
Companies with very large debts, persistent non-compliance, or debts already subject to a winding-up petition face a much harder conversation and may be pointed toward other options if you owe HMRC and can't pay.
How instalment length and amounts are decided
There is no fixed formula. HMRC's Debt Management team looks at what the company can realistically afford each month, based on income, essential outgoings, and existing debts, then works backwards to a repayment period.
In practice, most Time to Pay arrangements run for **six to twelve months**, though longer plans are agreed where the case supports it — particularly for larger debts with credible forecasts. Shorter plans of a few months are common for smaller, more manageable arrears.
- HMRC expects the company to pay what it can afford now, not the minimum it would prefer to pay.
- A larger upfront payment, where the company can make one, often improves the odds of approval and shortens the term.
- The proposal should leave enough working capital for the company to keep trading and stay compliant with new tax obligations as they arise.
Directors weighing up realistic terms may find it useful to read more on how long you can spread HMRC debt for typical durations by debt size.
Interest that still accrues during a TTP
A Time to Pay arrangement does not stop interest. HMRC charges interest on unpaid tax from the original due date until it is fully paid, at the rate set for late payment, which is reviewed periodically.
This means the final amount paid will be higher than the original arrears. It is worth building this into any cash flow forecast rather than assuming the monthly instalment figure is fixed once agreed — HMRC may recalculate as interest accrues on the reducing balance.
Penalties are a separate matter. Where penalties have already been charged (for example, for late payment or late filing), these can usually be included in the arrangement, but agreeing a TTP does not automatically cancel penalties already assessed.
How to approach HMRC and what they will ask
Most companies contact HMRC's Business Payment Support Service or Debt Management team, either by phone or, for some debts, online. It is generally best to make contact before the payment deadline passes, or as soon as possible afterwards, rather than waiting for HMRC to chase.
Expect HMRC to ask for:
- The tax reference and the exact amount owed.
- An explanation of why the company cannot pay in full.
- Recent management accounts or bank statements showing income and outgoings.
- A proposed monthly payment amount and preferred term.
- Confirmation that other tax obligations (payroll, VAT returns) will continue to be met on time.
Directors who want a structured approach to the conversation, including how to present the figures, may find it helpful to read how to negotiate a Time to Pay with HMRC alongside this guide.
What can cause a TTP to be refused or cancelled
HMRC will decline a request, or cancel an existing arrangement, in several common situations:
- Missed instalments — even one or two missed payments can trigger cancellation and immediate demand for the full outstanding balance.
- New arrears building up — falling behind on current VAT or PAYE while paying off an existing TTP undermines the case that the company can manage its finances.
- Unrealistic or unsupported proposals — offers not backed by evidence of income and outgoings are routinely rejected.
- Repeated requests — a company that has broken previous Time to Pay arrangements will find HMRC far less willing to agree another.
- Signs of insolvency — where the underlying problem looks structural rather than temporary, HMRC may consider the company more suited to a formal insolvency process.
If a TTP is refused or cancelled, HMRC can move to enforcement, which may eventually include a winding-up petition presented to the court.
TTP vs formal insolvency options
A Time to Pay arrangement works well when the underlying business is viable and the problem is a temporary cash flow squeeze. It is less suitable where debts have built up over a long period, across multiple creditors, or where the company cannot see a realistic route to clearing the balance.
In those cases, a director's next conversation is often with a regulated insolvency practitioner about formal options such as:
- A Company Voluntary Arrangement (CVA) — a formal, legally binding agreement with all creditors, not just HMRC.
- Administration — a court-recognised process giving the company protection from creditor action while a rescue or orderly wind-down is arranged.
- Creditors' Voluntary Liquidation (CVL) — an orderly closure of the company where it cannot be rescued.
These processes are governed by the Insolvency Act 1986 and administered by licensed insolvency practitioners, not by HMRC directly.
Frequently asked questions
How long does an HMRC Time to Pay arrangement usually last?
Most arrangements run for six to twelve months, though the exact length depends on the size of the debt and what the company can realistically afford each month. Longer plans are agreed in some cases where the proposal supports it.
Do I need to pay a deposit to get a Time to Pay arrangement?
HMRC does not always require an upfront deposit, but offering one — where the company can afford it — often makes a proposal more credible and can shorten the overall term.
What happens if I miss a payment under a TTP?
A missed instalment can lead HMRC to cancel the arrangement and demand the full remaining balance immediately, potentially followed by enforcement action.
Can I include more than one type of tax in the same arrangement?
Yes. HMRC can combine VAT, PAYE, corporation tax and other liabilities into a single Time to Pay arrangement with one monthly payment, where that suits the case.
Will a Time to Pay arrangement stop HMRC issuing a winding-up petition?
An active, up-to-date arrangement generally pauses further enforcement, but it does not remove HMRC's underlying right to pursue the debt if the plan is broken.
Getting specialist help to structure a proposal
Putting together a credible Time to Pay proposal — with the right figures, the right term, and a realistic monthly amount — makes a genuine difference to whether HMRC agrees it. Where arrears have grown large, involve several tax types, or sit alongside other creditor pressure, it is often worth getting specialist input before approaching HMRC.
This article is general information, not legal, financial or insolvency advice, and directors should speak to a regulated specialist about their own circumstances.
If you would like to talk through your options, Harbourfirst can introduce you to a regulated insolvency practitioner or solicitor — start an enquiry.