What is a Time to Pay Arrangement?
A Time to Pay (TTP) Arrangement is a formal payment plan agreed between a business and HMRC that allows additional time to settle outstanding tax liabilities. Rather than facing immediate enforcement action, a business can spread its payments over a series of affordable instalments, giving it breathing space to restore stability and cash flow.
The purpose of a TTP arrangement is to help otherwise viable businesses that are temporarily unable to meet their tax obligations in full. It is not a means to avoid paying tax altogether but a structured way of clearing arrears without entering formal insolvency proceedings.
HMRC first introduced the Time to Pay concept during the 2008 financial crisis to support businesses struggling with liquidity. Since then, it has become a well-established feature of HMRC’s approach to business support, particularly during times of economic pressure such as the COVID-19 pandemic.
It is important to distinguish between a formal TTP arrangement, which is negotiated directly with HMRC and confirmed in writing, and an informal agreement, where short-term flexibility may be granted over a brief period without a detailed repayment plan.
TTPA Eligibility
HMRC will only agree to a Time to Pay Arrangement if the business can demonstrate that it is temporarily unable to meet its liabilities but remains fundamentally viable.
Typical eligibility criteria include:
- Clear evidence of genuine financial difficulty, supported by up-to-date accounts or cash flow forecasts.
- A reasonable proposal showing that future payments can be met on time.
- A good compliance history, meaning that the business has generally submitted tax returns and payments on time in the past.
- Willingness to engage openly and promptly with HMRC.
A TTP arrangement can apply to a range of taxes, including VAT, PAYE, Corporation Tax and Self Assessment. HMRC will review each case individually, considering the size of the debt, the sector, and the business’s financial prospects.
The Business Payment Support Service (BPSS)
HMRC operates a dedicated helpline known as the Business Payment Support Service (BPSS), which is designed to help businesses in financial distress discuss and arrange payment plans.
You can contact the BPSS on 0845 302 1435. The service is available Monday to Friday, generally from 8am to 6pm.
Through this service, HMRC representatives can assess your situation, explore repayment options, and potentially set up a TTP agreement during the call itself. Businesses are encouraged to contact HMRC before missing a payment and early communication often leads to a more favourable outcome.
The BPSS also provides guidance on managing upcoming liabilities, avoiding penalties, and maintaining compliance during difficult trading periods.
How to Set Up a Time to Pay Arrangement With HMRC
Before approaching HMRC, careful preparation is key. Businesses should gather all relevant financial documentation, including management accounts, cash flow forecasts, and details of outstanding debts. This information will form the basis of the repayment proposal.
A realistic cash flow forecast should show that the proposed instalments are affordable while allowing the business to keep up with future tax obligations. Understanding the full extent of your tax arrears, including VAT, PAYE, and Corporation Tax, ensures transparency and builds trust with HMRC.
Repayment proposals should strike a balance between what the business can afford and what HMRC considers reasonable, typically over 3 to 12 months depending on circumstances.
TTPA Application Process
Businesses can contact HMRC either via the BPSS helpline or by writing directly to the relevant tax office. During the initial call, HMRC will request key details, including:
- The amount owed and the type of tax involved
- Reasons for current financial difficulties
- Cash flow projections and repayment proposals
It’s essential to approach this stage proactively and professionally, as the first impression often sets the tone for the negotiation.
Negotiation Strategies
When negotiating a TTP arrangement, businesses should aim to demonstrate:
- Affordability. The proposed payments are realistic and sustainable.
- Commitment. The business has taken steps to improve financial discipline.
- Transparency. All relevant financial information has been provided.
HMRC’s primary concern is that the business will not fall behind again. Therefore, a clear explanation of how future compliance will be maintained can make a significant difference.
If HMRC expresses concern about the proposed repayment schedule, flexibility and cooperation are crucial. Businesses may need to revise proposals to reach a mutually acceptable plan.
HMRC does have the right to refuse a payment plan if it believes the business cannot meet the terms or is not being fully transparent. In such cases, alternative recovery or insolvency options may need to be explored.
Formulating a Repayment Offer
The repayment plan should be based on accurate financial forecasting. Instalments must be sustainable and not jeopardise other key business operations. Typical TTP arrangements run between 3 and 12 months, although longer periods may be considered for exceptional cases.
Seasonal businesses should highlight fluctuations in income to justify any uneven repayment schedules. For example, lower payments during quieter months and higher instalments during peak trading periods.
It’s worth noting that while TTP arrangements provide breathing space, interest will usually continue to accrue on the outstanding balance. This ensures consistency with HMRC’s standard late payment rules.
Managing and Maintaining a Time to Pay Agreement
Terms and Conditions
Every TTP arrangement is governed by clear terms. These generally include:
- A fixed repayment schedule outlining dates and amounts.
- Ongoing interest charges at HMRC’s standard late payment rate.
- The requirement to keep up with current tax obligations in addition to the arrears.
- The possibility of enforcement action if payments are missed.
If unforeseen circumstances arise, it may be possible to renegotiate the arrangement. However, HMRC expects businesses to contact them immediately if a payment cannot be made on time.
Compliance Requirements
To maintain a Time to Pay Arrangement, a business must:
- Continue submitting all tax returns on time.
- Pay all new tax liabilities as they fall due.
- Maintain open communication with HMRC.
- Keep accurate and up-to-date financial records.
Non-compliance can lead to cancellation of the agreement and the resumption of collection or enforcement action.
When Things Go Wrong
If a business starts to struggle with payments, early engagement with HMRC is vital. Signs of a failing arrangement include missed payments, worsening cash flow, or new tax arrears.
If payments can no longer be met, businesses should immediately request a renegotiation. HMRC may agree to revised terms if the situation is temporary, but repeated breaches or a lack of transparency can trigger enforcement action such as distraint, winding-up petitions, or referral to debt collection agencies.
A failed TTP arrangement can also indicate that the business is insolvent, in which case formal insolvency procedures such as a Company Voluntary Arrangement (CVA) or administration may be more appropriate.
Alternatives to a TTPA
If a TTP arrangement is refused or becomes unmanageable, other routes should be considered. These may include:
- Time extensions or staged payments under alternative HMRC schemes.
- Seeking professional restructuring or insolvency advice.
- Formal recovery mechanisms such as a CVA, administration, or liquidation.
An insolvency practitioner can provide independent advice tailored to the company’s circumstances, helping directors meet their legal duties and avoid potential personal liability. We are on hand if you have any questions or are uncertain of how to proceed.
