A Time to Pay arrangement is an agreement between a taxpayer and HM Revenue & Customs that the outstanding tax debt, whether corporation tax, VAT, PAYE, or self-assessment income tax, will be paid in agreed instalments rather than in a single lump sum. HMRC operates TTP arrangements under its general care and management powers and has no statutory obligation to grant them. Whether HMRC agrees to a TTP, and on what terms, is a discretionary decision influenced by the taxpayer’s financial position, payment history, credibility, and the speed and transparency with which they have engaged.
TTP arrangements are not a new concept, but their profile rose significantly during and after the COVID-19 pandemic, when HMRC operated the Coronavirus Business Support TTP Scheme for VAT deferrals. Demand has remained elevated as businesses face rising costs and tightening margins. HMRC’s own data confirms that billions of pounds of tax debt are currently being managed under active TTP agreements.
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What Tax Debts Can Be Included?
Most UK tax liabilities can in principle be included in a TTP arrangement, including VAT, PAYE and National Insurance contributions, corporation tax, self-assessment income tax, and tax penalties. HMRC will typically expect current tax obligations to be met in full as they fall due, the TTP is for arrears, not a mechanism for deferring ongoing liabilities. Falling behind on current obligations while a TTP is in place is one of the most common causes of arrangement breakdown.
How to Apply for a Time to Pay Arrangement
Most TTP requests are made by telephone to HMRC’s Business Payment Support Service or, for self-assessment debts, through the Government Gateway. HMRC may also be approached in writing, though telephone contact generally produces a faster response. For larger or more complex liabilities, particularly those involving disputed VAT or liabilities arising from an HMRC investigation, a written proposal supported by detailed financial information is strongly advisable.
HMRC will typically require a clear picture of the taxpayer’s income, expenditure, assets, and liabilities. It will want to understand why the debt has arisen, what steps have been taken to address it, and why an instalment arrangement is preferable to immediate payment. Presenting this information credibly and completely is essential: HMRC officers are experienced at identifying incomplete disclosures, and an application that appears to minimise the taxpayer’s means is likely to be refused or result in a shorter, more demanding repayment schedule.
What HMRC Will and Will Not Accept
HMRC generally expects TTP arrangements to be completed within twelve months, though it will consider longer periods where the taxpayer’s circumstances genuinely justify it. Arrangements extending beyond two years are uncommon and will require robust financial evidence. Interest continues to accrue on the outstanding balance throughout the TTP period, currently at HMRC’s published late payment interest rate, so a longer arrangement may reduce monthly payments but increase the total sum paid.
HMRC will not grant a TTP where it considers the taxpayer is simply seeking to delay the inevitable, where there is a history of failed arrangements without adequate explanation, or where the debt arises from conduct it regards as deliberate non-compliance. Businesses that are already the subject of an HMRC investigation or against whom a statutory demand has been issued face additional scrutiny.
What Happens If You Default?
Defaulting on a TTP arrangement, whether by missing an instalment, failing to file returns on time, or accruing new tax debt, typically results in HMRC terminating the arrangement immediately and treating the full outstanding balance as due. This can trigger rapid enforcement action, including statutory demands, asset seizure via HMRC’s direct recovery powers, or, in the most serious cases, a winding-up petition to the Companies Court. The consequences of default can therefore be far more severe than if no TTP had been sought at all.
Where a TTP is at risk of breaking down, early legal advice is critical. In some cases it is possible to renegotiate terms before a formal default is declared, particularly where the taxpayer can demonstrate a genuine and temporary change in circumstances. Specialist legal representation significantly improves the prospects of a successful renegotiation.
When HMRC Refuses: Your Options
HMRC’s refusal to grant or continue a TTP arrangement is not always the end of the road. Where refusal appears unreasonable or procedurally flawed, it may be possible to challenge that decision, including by way of judicial review. In parallel, the underlying tax liability itself may be open to challenge through HMRC’s internal review process or by appealing to the First-tier Tribunal. A successful appeal on the liability can dramatically reduce, or eliminate, the debt HMRC is seeking to enforce.
Where the debt is genuine but the business is genuinely insolvent, a formal insolvency process — including a Company Voluntary Arrangement, may offer a more structured solution than a TTP. Our colleagues at Winding Up Petition Solicitors regularly advise on the interaction between HMRC enforcement and insolvency law.
Expert Legal Advice on HMRC Time to Pay Disputes
Negotiating a TTP arrangement may appear straightforward, but for businesses carrying significant tax debt, the stakes are high and the margin for error is small. A poorly presented application, an unrealistic repayment schedule, or a missed instalment can convert a manageable liability into an existential threat. Our specialist tax solicitors and barristers at LEXLAW advise on TTP negotiations, HMRC tax appeals, penalty mitigation, and enforcement defence from our offices in Middle Temple, London. If HMRC is pressing for payment and your business needs time, contact us today for a fixed-fee consultation.
Want legal advice from Tax Solicitors on your case?
Our simple enquiry form goes immediately to our tax litigators in Middle Temple, London. Call us on +442071830529 from 9am-6pm.
Frequently Asked Questions (FAQ’s)
1. Can HMRC refuse a Time to Pay arrangement, and what can I do if they do?
Yes. HMRC has full discretion over whether to grant a Time to Pay arrangement and is under no statutory obligation to agree to one. Refusals most commonly occur where HMRC considers the taxpayer’s proposal unrealistic, where there is a history of missed payments or broken arrangements, or where the debt arises from conduct HMRC regards as deliberate non-compliance. If HMRC refuses, you are not without options. The underlying tax liability may itself be open to challenge through an HMRC internal review or a formal appeal to the First-tier Tribunal. Where refusal appears procedurally improper or disproportionate, judicial review of HMRC’s decision may be available. Taking specialist legal advice promptly after a refusal is critical, as HMRC may move quickly to enforcement action once negotiations break down.
2. Will HMRC charge interest on a Time to Pay arrangement?
Yes. Interest continues to accrue on the outstanding balance throughout the duration of a Time to Pay arrangement at HMRC’s published late payment interest rate, which is set by reference to the Bank of England base rate. This means that a longer repayment period reduces monthly instalments but increases the total amount repaid. In addition, if penalties have been assessed alongside the underlying liability, those too may continue to attract interest if not separately addressed. When negotiating a TTP, it is important to factor in the full cost of the arrangement — not just the instalment amounts — and to consider whether any aspect of the liability or penalty position can be reduced or appealed in parallel.
3. What happens to an HMRC Time to Pay arrangement if my financial position worsens?
If your financial circumstances deteriorate after a Time to Pay arrangement has been agreed, you should contact HMRC proactively before missing an instalment. Failing to communicate and simply defaulting is the worst outcome: HMRC will typically terminate the arrangement immediately, treat the full outstanding balance as due, and may escalate to enforcement action — including issuing a statutory demand or presenting a winding-up petition. By contrast, approaching HMRC early with updated financial evidence may allow the arrangement to be renegotiated on revised terms. Specialist legal representation at this stage significantly improves the likelihood of a successful outcome, as solicitors experienced in HMRC negotiations understand how to present revised proposals in a way that HMRC will consider credible.
4. Can I include a disputed tax liability in a Time to Pay arrangement?
This is a question that requires careful handling. HMRC may agree to a TTP covering a liability that is under appeal, but accepting instalments under a TTP whilst simultaneously appealing can in some circumstances be construed as an acceptance of the liability — potentially weakening your legal position. Where a VAT assessment or other tax demand is genuinely disputed, the better course is usually to challenge it through the formal appeal route while separately managing cash flow and enforcement risk. In VAT cases, a valid appeal automatically suspends the obligation to pay in most circumstances, which may make a TTP unnecessary. Taking advice from specialist tax solicitors before entering a TTP on a disputed debt is strongly recommended.
5. Does an HMRC Time to Pay arrangement affect my credit rating or company’s ability to trade?
A TTP arrangement is a private agreement between the taxpayer and HMRC and is not registered at Companies House or reported to credit reference agencies in the same way as a county court judgment or formal insolvency process. It does not, of itself, appear on your company’s credit file. However, the underlying tax debt may already be affecting your creditworthiness, and if HMRC escalates to a statutory demand or winding-up petition because a TTP breaks down, the reputational and commercial consequences can be severe and immediate. Directors should also be aware that where a company is insolvent or approaching insolvency, continuing to trade and incur tax liabilities without addressing the position may give rise to personal liability concerns. If you are uncertain about your company’s position, contact our specialist tax and litigation team for confidential advice.