HMRC Time to Pay… Rescue Tool or Just Delaying the Inevitable?

by | Jun 24, 2026 | Creditor, Supplier and Employee Issues

For many struggling companies, HMRC is not just another creditor.

It is often the largest creditor, the most persistent creditor and the one debt that directors have quietly allowed to grow while keeping wages, suppliers and lenders paid.

When the pressure increases, directors commonly ask me the same question:

Can we get a Time to Pay arrangement?

Sometimes the answer is yes.

But that is not the same as saying that Time to Pay will save the company.

What is a Time to Pay arrangement?

A Time to Pay arrangement allows a company to pay overdue tax by instalments rather than immediately in full.

HMRC will look at whether the proposed arrangement is affordable and realistic. If an acceptable plan cannot be agreed, HMRC can require payment in full and may continue enforcement action.

This can cover liabilities such as:

  • VAT

  • PAYE and National Insurance

  • Corporation Tax

  • other overdue taxes and penalties

It is not a formal insolvency procedure. Directors remain in control and the company continues trading.

What HMRC will want to know

Calling HMRC and saying, “Cashflow is difficult, but things should improve,” will rarely be enough.

HMRC may ask:

  • how much the company owes;

  • what caused the arrears;

  • how much can be paid immediately;

  • what monthly payments the company can genuinely afford;

  • whether other taxes will fall due during the arrangement;

  • what assets, savings or funding are available;

  • whether the company’s forecasts are credible.

HMRC’s guidance says it may expect a company to reduce the debt by releasing value from assets such as stock, vehicles or shares. It may also ask whether directors can introduce funds or obtain additional lending.

That does not mean directors are automatically obliged to put their own money in.

It does mean HMRC is unlikely to accept a proposal where the company retains available resources while asking the taxpayer to carry all the risk.

Is the underlying business viable?

This is the question that matters most.

A Time to Pay arrangement can work where:

  • the underlying business is profitable;

  • the tax arrears arose from a temporary problem;

  • the company can meet current trading costs;

  • future VAT, PAYE and Corporation Tax can be paid on time;

  • the historic debt can be cleared from genuine surplus cash.

It will not solve a business that loses money every month.

If the company is already unable to pay current taxes, adding monthly arrears payments on top is unlikely to improve matters.

That is not a rescue plan. It is a larger monthly burden.

The future-tax trap

One of the most common reasons arrangements fail is that directors concentrate on paying the old debt but cannot pay the new tax.

HMRC’s internal guidance requires future returns to be filed on time and future liabilities to be paid when due, unless the arrangement is formally reconsidered.

So the cashflow must cover:

  1. wages and essential trading costs;

  2. current VAT, PAYE and other taxes;

  3. the agreed Time to Pay instalment;

  4. a sensible margin for unexpected problems.

If it only works when every customer pays on time and nothing goes wrong, it does not work.

How long will HMRC allow?

There is no single public maximum period. HMRC says the duration depends on the amount owed and what the taxpayer can afford.

However, HMRC’s internal guidance says arrangements are generally tailored over a relatively short period and arrangements extending beyond 12 months require closer consideration.

The right proposal is therefore not the smallest monthly payment you think HMRC might accept.

It is the fastest payment plan the company can genuinely maintain without immediately falling behind again.

Interest does not disappear

A Time to Pay arrangement does not normally freeze late payment interest.

For example, HMRC confirms that interest continues to accrue on outstanding VAT while it is being paid by instalments.

Time costs money.

That is another reason not to seek an unnecessarily long arrangement simply to make the monthly figure look comfortable.

When Time to Pay is false comfort

Be careful where:

  • the company has broken previous arrangements;

  • tax arrears increase every month;

  • current returns are missing;

  • forecasts rely on unconfirmed sales;

  • directors are using VAT or PAYE as working capital;

  • the company has no realistic surplus after normal trading costs;

  • other creditors are also taking enforcement action.

In those circumstances, a new arrangement may only postpone a decision that already needs to be made.

What directors should prepare before contacting HMRC

Prepare:

  • an up-to-date creditor list;

  • details of every HMRC liability;

  • current management accounts;

  • a realistic 13-week cashflow forecast;

  • details of available assets and funding;

  • an explanation of how the arrears arose;

  • the maximum immediate payment available;

  • a monthly proposal the company can actually maintain.

HMRC deals with Time to Pay requests individually and expects the best realistic proposal the taxpayer can afford.

Takeaway checklist

Before asking for Time to Pay, ask:

  • Is the underlying business profitable?

  • Can all new taxes be paid on time?

  • Is the cashflow based on evidence rather than hope?

  • Can the company make an immediate payment?

  • Have all returns been submitted?

  • Are directors prepared to explain what assets and funding are available?

  • Will the arrangement reduce the debt every month?

  • Have we considered what happens if HMRC says no?

Final thought

Time to Pay can be an excellent rescue tool.

But it only buys time. It does not create profit, repair margins or solve a failing business model.

The real question is not, “Will HMRC give us longer?”

It is:

What are we going to do with the time they give us?

#HMRC #TimeToPay #CompanyInsolvency #Cashflow #DirectorsDuties #BusinessRescue