Cashflow does not always cooperate with the tax calendar. When a Corporation Tax, VAT, PAYE or Self Assessment liability falls due and the bank account cannot cover it, the worst response is silence. HMRC's Time to Pay (TTP) framework exists precisely to keep solvent businesses out of enforcement, but the rules of engagement have tightened materially since the pandemic-era flexibility ended.
What a Time to Pay arrangement actually is
A TTP is a formal agreement to spread payment of a tax debt over an extended period — typically up to 12 months for direct taxes, though longer is possible in restructuring scenarios. It does not write off the debt; interest continues to accrue at HMRC's current rate (Bank of England base plus 4% for late payment, applied daily). What TTP does deliver is the suspension of penalty escalation and enforcement action, provided you stick to the agreed schedule.
The self-serve route
For Self Assessment liabilities up to £30,000, taxpayers can set up an instalment plan online through their HMRC account without speaking to anyone, provided the return is filed and they have no other tax debts. The plan must complete within 12 months. This route is fast and grants are almost automatic if the eligibility criteria are met. It is the default starting point for most sole traders facing a January cashflow squeeze. Our self assessment service often guides clients through this where appropriate.
The negotiated route
Above the £30,000 threshold, for VAT or PAYE debts, or where the standard 12 months is insufficient, you must phone HMRC's Business Payment Support Service. Expect a structured conversation in which the officer will ask:
- Why the payment cannot be made on time.
- What other debts you owe (HMRC and otherwise).
- What income and expenditure you expect over the proposed payment window.
- What you have done to maximise cash — selling stock, calling in receivables, cutting discretionary spending.
- Whether the directors or owners can contribute personal funds.
This is, in effect, a financial fitness test. HMRC is not interested in spreading payment for a business that is fundamentally insolvent — it will refuse and refer to enforcement. But for businesses with a temporary cashflow gap and a credible recovery plan, the arrangement is usually granted.
When HMRC says yes
Approvals share recurring features: the underlying business is profitable on paper; previous tax obligations have been met on time; the cause of the current shortfall is identifiable (lost contract, delayed receivable, one-off cost shock); and the proposed schedule is realistic. Submitting management accounts and a cashflow forecast strengthens the case considerably.
When HMRC says no
Refusals also share patterns: a history of repeated TTPs without ever clearing the debt; missed instalments on a prior arrangement; evidence that the business is loss-making and unlikely to recover; refusal to disclose assets or directors' positions; or unrelated tax debts that the taxpayer has not addressed. HMRC also tends to refuse where the debt has already been passed to debt collection or enforcement.
What happens if you breach the arrangement
A single missed instalment can void the TTP. HMRC will typically issue a 7-day demand for the full outstanding balance, and the protective effect on penalties and enforcement falls away. If your circumstances change before the next instalment, ring HMRC before the due date and ask to vary the arrangement — they are often more accommodating in advance than after default.
Interaction with insolvency
TTP is for going concerns. If the business cannot service even the proposed instalments, the conversation moves to formal insolvency processes (CVA, administration, liquidation), and HMRC may itself initiate winding-up if engagement breaks down. Crown preference for VAT, PAYE, employee NIC and CIS deductions means HMRC is rarely a passive creditor.
Practical advice
- File first, pay later. Always file the return on time even if you cannot pay — separates the points-based filing penalty from the payment issue.
- Engage early. Contact HMRC before the due date, not after a demand has arrived.
- Prepare numbers. A simple cashflow showing realistic instalments dramatically improves the conversation.
- Honour the arrangement. Treat the agreed payments as if they were a senior secured loan.
If you are weighing up a TTP request and unsure how to frame it, book a call with our team or visit our contact page. Our business advisory service routinely helps directors structure proposals that HMRC will accept, and the difference between a confident, well-prepared call and an ad hoc one is often the difference between approval and refusal.