HMRC Time to Pay Arrangements: A UK director's guide

TTP in plain terms

A Time to Pay Arrangement is an agreement between a UK taxpayer and HMRC to settle an outstanding tax debt by instalments over a defined period rather than in a single payment when due. TTP is available for both individuals and companies, but this guide addresses the corporate context only — where a UK limited company has unpaid tax (typically VAT, PAYE, or corporation tax) and proposes to clear it over time.

The agreement typically runs for 6 to 12 months from the date it is agreed. Longer arrangements (up to 24 months in exceptional cases) are sometimes available where the financial position supports them. Within the agreed period, the company makes monthly payments that clear the arrears. During the same period, the company must also meet current tax obligations as they fall due — TTP does not extend to current tax.

TTP is offered through HMRC's Business Payment Support Service (BPSS) for most cases. The BPSS is HMRC's dedicated team for taxpayers who cannot pay tax on time. For larger or more complex cases (typically arrears above £100,000 or where there are multiple tax types involved), TTP applications are handled through the company's assigned HMRC Debt Management contact directly.

Interest accrues on the outstanding tax during the TTP period at the published HMRC late-payment rate. Interest is not waived as part of TTP — the company continues to pay interest on the outstanding balance until it is cleared. Penalties incurred up to the date of TTP agreement are generally included in the TTP amount; ongoing penalties are typically suspended for the duration of the arrangement provided the company complies with the agreed terms.

What TTP is and is not

Common confusions worth setting aside:

• TTP is not a debt write-off. The full tax debt remains owed and must be paid in full over the agreed period. TTP simply changes the timing, not the amount.
• TTP is not a formal insolvency procedure. It is an administrative arrangement with HMRC that does not involve court process, professional appointee, or insolvency procedure framework. It does not bind other creditors and does not provide any moratorium against trade creditor enforcement.
• TTP is not a substitute for formal procedure where the company is insolvent. Where the underlying financial position requires CVA, administration, or CVL, TTP will not deliver a sustainable outcome — it will typically fail in implementation and the company will end up in formal procedure with months of TTP failure as additional negative context.
• TTP is not a substitute for insolvency advice. The application is administrative; the strategic question of whether TTP is the right response is professional. The two should be considered separately.
• TTP does not protect directors from personal liability. Personal exposure mechanisms (PLNs, wrongful trading, joint and several liability for VAT fraud) operate independently of any TTP arrangement and are not extinguished by TTP.

The three eligibility tests

TTP is appropriate where three conditions are satisfied:

• The company is illiquid but viable. The cash-flow problem is recoverable; the underlying business generates positive operating cash flow at the operating level; the arrears reflect a temporary working capital constraint rather than persistent operating losses.
• The company can deliver the proposed plan alongside current tax obligations. TTP that requires the company to default on current tax to fund arrears repayments is doomed — HMRC will reject such applications, and even where accepted they fail in implementation.
• The company has reasonable HMRC compliance history. Companies with clean records receive standard treatment and standard terms. Companies with patterns of repeated default face tougher conditions or rejection — HMRC's tolerance for repeated TTP is limited.

Where all three conditions are met, TTP is typically the right first-line response. Where any one fails, the alternative is usually a formal procedure: CVA where the underlying business is viable but legacy debt is unsustainable; administration where rapid action and moratorium protection are needed; CVL where the underlying business is not viable.

When TTP is the wrong answer

TTP is the wrong answer in several common scenarios:

• Where the company is insolvent in substance. A company that fails the cash-flow test or balance-sheet test (section 123 IA 1986) is insolvent in law. TTP applied to an insolvent company is typically a delaying mechanism rather than a solution — the company continues to deteriorate, the arrears grow, and the eventual formal procedure happens later with a worse position.
• Where current operating cash flow does not support both TTP repayments and current tax. Where the company cannot pay current PAYE while clearing prior PAYE arrears, the TTP framework is being misapplied to a substantive insolvency. The right answer is formal procedure.
• Where the company has multiple recent failed TTPs. HMRC's view in this scenario is that the company should commit to formal procedure rather than seek further TTP. Repeated TTP applications are typically rejected.
• Where the company is in active enforcement at the petition stage. Once HMRC has presented a winding-up petition, TTP is typically too late — the petition timetable is short and formal procedure (CVL or administration) becomes the appropriate response.

TTP vs formal procedure

The choice between TTP and formal procedure depends on the company's financial position and the wider creditor body. Honest analysis at the pre-application stage matters: where TTP is the right answer, it is materially cheaper and lighter than formal procedure; where it is the wrong answer, attempting it first typically produces worse outcomes than going directly to the appropriate procedure.

The TTP application process is structured. Engagement timing, financial preparation, and the channel of contact all materially affect outcome.

Step 1 — Engage early

Timing materially affects the outcome. HMRC engagement at the early stages of the enforcement progression — before reminders escalate to Debt Management, before Field Force visits, before security demands — produces better terms and lighter scrutiny. Companies that wait until late-stage enforcement (Field Force, distraint) before proposing TTP face tougher conditions and a higher rejection rate.

The practical signal: if the company is missing payments or expects to miss payments, contact HMRC before missing them rather than after. Pre-emptive contact — "we expect to be unable to pay our July VAT in full" — is treated significantly better than reactive contact — "we missed July VAT and want to discuss". The signal of engagement matters as much as the substance of what is proposed.

Step 2 — Prepare the financial case

HMRC requires financial information to assess any TTP application. The principal items needed:

• Current management accounts (typically the most recent month and year-to-date).
• Cash flow forecast covering at least the proposed TTP period and ideally beyond. The forecast should show the company can pay the TTP instalments while also meeting current tax obligations and other essential operational costs.
• Schedule of current tax liabilities (VAT, PAYE, corporation tax) showing what is owed and what is currently coming due.
• Brief explanation of the cause of the arrears and what has changed (or will change) to make the TTP achievable.
• For larger or more complex cases, broader financial information: balance sheet, debtor analysis, creditor analysis, secured creditor position.

Quality of preparation matters. A well-prepared application shows HMRC the company is serious and engaged, and supports the case that the proposed plan is realistic. A weak application — incomplete financials, vague cash flow assumptions, no clear cause analysis — invites rejection or tougher terms. Where preparation capacity is limited, the company's accountant typically supports the financial case; for more complex situations, our TTP cash flow forecast guide covers the specifics.

Step 3 — Contact HMRC

For most cases, the first point of contact is HMRC's Business Payment Support Service. Contact is typically by phone (the BPSS publishes a dedicated number for businesses; check current contact details on gov.uk before calling). Initial contact should:

• Identify the company and the specific tax(es) in arrears.
• Explain the cause of the arrears — briefly and without elaboration.
• Propose specific terms — the period over which the company can clear the arrears and the monthly amount.
• Confirm the company can meet current tax obligations during the proposed TTP period.
• Offer to provide supporting financial information.

The BPSS typically responds either by accepting the proposed terms directly (in straightforward cases), by counter-proposing different terms, or by requesting further financial information. Larger or more complex cases (typically arrears above £100,000) are escalated to the company's assigned HMRC Debt Management contact rather than handled by BPSS directly.

Step 4 — Negotiate the terms

HMRC's response to the initial proposal opens the negotiation. Common negotiation points: length of the TTP period (HMRC standard preference 6 months; companies typically prefer 12); monthly amount; specific tax types covered; conditions on continued performance; provision for variation. Most TTP negotiations conclude within a single conversation or short series of communications. Where the position is more complex — large arrears, multiple tax types, deteriorating financial position, prior TTP defaults — negotiations can extend over weeks.

Throughout, HMRC's position is principled but often pragmatic: where the company is engaged, transparent, and proposing realistic terms, HMRC typically finds a workable arrangement.

Step 5 — Confirmation and ongoing performance

Once terms are agreed, HMRC confirms the TTP in writing. The confirmation sets out the agreed period, monthly amounts, payment dates, and conditions. The company is bound by the agreed terms; HMRC suspends active enforcement during the TTP period provided the company complies.

Ongoing performance is the central commitment. The company must:

• Make every TTP instalment in full and on time.
• Pay current tax obligations as they fall due. This is the single most common cause of TTP failure — companies that meet TTP instalments but miss current VAT, PAYE, or corporation tax breach the arrangement and lose its protection.
• Maintain compliance with all reporting obligations — VAT returns, PAYE submissions, corporation tax returns — throughout the TTP period.
• Notify HMRC if circumstances change materially. Where the company can no longer meet the agreed terms, early notification typically allows variation or extension; silence followed by default typically results in TTP termination.

Where the company performs to the agreed terms throughout the TTP period, the arrears are cleared at the end and HMRC closes the file. The company emerges with no formal record of the TTP itself — it is an administrative arrangement, not a public procedure.

Typical terms HMRC agrees

• Length: 6 to 12 months. Up to 24 months in exceptional cases with strong financial justification.
• Monthly instalments: equal payments calculated from total arrears plus interest divided by the agreed period.
• Interest: continues to accrue on the outstanding balance at the published HMRC late-payment rate. Not waived.
• Penalties: penalties incurred up to the TTP date are typically included in the TTP amount; ongoing penalties suspended provided performance is maintained.
• Coverage: the specific tax debts identified in the application. Subsequent tax obligations are not covered.
• Variation: the company can apply to vary the TTP if circumstances change. Variations are often granted where the company is engaging proactively.

What HMRC looks for

• Engagement timing. Early engagement is treated more favourably than late engagement. Pre-emptive contact (before missing payments) is treated more favourably than reactive contact.
• Realism of the proposed plan. Plans that allow current tax to be paid in parallel with arrears repayment are realistic; plans that require deferring current tax are not.
• Compliance history. Companies with clean records receive standard treatment. Companies with patterns of late filing, missed payments, or prior TTP defaults face tougher scrutiny.
• Quality of supporting information. Complete, well-prepared financial information supports the case; vague or incomplete information undermines it.
• Transparency about the cause of arrears. Honest explanation — cash flow constraint, lost contract, market disruption — is treated better than vague or evasive accounts.
• Commitment to ongoing compliance. The company's stated intention to remain compliant throughout the TTP period and beyond is part of HMRC's assessment.

Acceptance rates

HMRC does not publish formal acceptance rates for TTP applications, but practitioner experience suggests that the substantial majority of applications from companies in genuine first-time distress are accepted. Acceptance is materially higher for: companies engaging early; companies with clean compliance history; applications with strong supporting financial information; arrears amounts proportionate to the company's size and operating cash flow.

Acceptance is materially lower for: companies engaging late or only after enforcement has commenced; companies with prior failed TTPs; applications proposing unrealistic timelines; applications that allow current tax to remain unpaid; cases where HMRC's analysis suggests the company is insolvent rather than just illiquid. Where any of these factors is present, the rejection rate rises sharply.

Unrealistic timelines

The most common reason for TTP rejection is a proposed period HMRC will not accept. Companies sometimes propose 24 or 36-month TTPs hoping for accommodation; HMRC typically refuses anything beyond 12 months in standard cases and 24 months in exceptional cases. Where the company genuinely cannot clear the arrears within HMRC's preferred period, the issue is typically that the company is insolvent rather than just illiquid — which means the right response is formal procedure rather than extended TTP.

Failure to maintain current obligations

HMRC will not accept a TTP that allows current tax to remain unpaid. The arithmetic test is simple: can the company's operating cash flow support both the TTP instalments and current tax as it falls due? Where the answer is no, the company is essentially asking HMRC to fund continued non-compliance. HMRC's consistent position is that this is not a TTP scenario — it is a formal procedure scenario.

Repeated default history

Companies that have previously entered TTP and defaulted face elevated scrutiny on subsequent applications. HMRC's view is that repeated TTP applications signal a structural rather than temporary problem and that formal procedure is the appropriate response. Second TTPs are sometimes accepted where there has been a substantial intervening period of compliance and a clear change in circumstances; third or fourth TTPs are typically refused.

Insolvency in substance

Where HMRC's analysis concludes the company is insolvent rather than just illiquid, TTP will be rejected and HMRC will press for the appropriate alternative — typically engagement with formal procedure. HMRC has access to substantial information about the company's position (filings, payment history, compliance patterns) and forms its own view about whether the company can realistically deliver TTP. Where HMRC's view is that the company cannot, applications are refused regardless of the company's position.

VAT TTP

VAT is the most common subject of TTP applications. Standard TTP terms apply but VAT carries some specific characteristics:

• Quarterly cycles mean VAT arrears can accumulate quickly across multiple periods. A company missing one quarter typically misses subsequent quarters before TTP is engaged.
• VAT is collected from customers on HMRC's behalf, which gives VAT non-payment a particular moral character that HMRC weights heavily. VAT TTPs are often subject to slightly tougher conditions than corporation tax TTPs.
• The new late payment penalty regime in force from 1 January 2023 imposes graduated penalties (2% after 15 days, 4% after 30 days, plus 4% per annum daily after 30 days). Penalties accruing up to the TTP date are typically included in the TTP amount.
• VAT TTP applications should typically be accompanied by a clear plan to maintain current VAT compliance. The dedicated VAT pillar covers VAT-specific procedural points in detail.

PAYE TTP

PAYE TTP arrangements involve specific considerations because of the personal exposure mechanism:

• Monthly payment cycles mean PAYE arrears can accumulate rapidly across multiple months.
• Personal Liability Notices for unpaid NICs (under section 121C SSAA 1992) create a personal stake for directors that other tax types do not. TTP that successfully clears PAYE arrears reduces PLN risk; failed TTP increases it.
• HMRC's view of PAYE non-payment is similar to VAT — the tax has been collected from employees on HMRC's behalf — and is treated comparably.
• Construction Industry Scheme deductions are typically grouped with PAYE for TTP purposes.
• PAYE TTP applications should explicitly address how current PAYE will be maintained alongside the arrears repayment. The dedicated PAYE pillar covers PAYE-specific procedural points and PLN implications.

Corporation tax TTP

Corporation tax TTPs are typically lighter-touch than VAT or PAYE because the moral character of CT non-payment is different (the company's own profits taxed):

• Annual cycles (or quarterly for QIPs companies) mean CT arrears tend to accumulate in larger lumps rather than the regular drip of VAT or PAYE.
• CT is unsecured in any subsequent insolvency procedure — it does not benefit from secondary preferential creditor status.
• HMRC's enforcement priority on CT is typically lower than on VAT or PAYE, which can mean longer TTPs are sometimes available.
• CT TTP applications are often combined with VAT or PAYE TTP applications where the company has multiple tax debts. The dedicated corporation tax pillar covers CT-specific procedural points.

Where HMRC rejects a TTP application, the position requires reassessment. Common reasons for rejection — unrealistic timelines, failure to maintain current obligations, repeated default history, insolvency in substance — each suggest different next steps.

Strategic options after rejection:

• Revise and resubmit. Where the rejection is on specific grounds that can be addressed (timeline reduced, current tax compliance demonstrated, additional financial information provided), a revised application sometimes succeeds. This is most likely where the rejection was on procedural rather than substantive insolvency grounds.
• Pay in full or in part. Where the rejection is on grounds the company can address by partial payment plus a shorter TTP, this combined approach is sometimes acceptable to HMRC.
• Engage with formal procedure. Where the underlying issue is insolvency rather than illiquidity, CVA, administration, or CVL becomes the appropriate response. Continuing to seek TTP after substantive rejection typically wastes time and worsens the position.
• Seek refinancing. Where the rejection is on financial grounds and the company has equity or asset value, refinancing may resolve the position without requiring either TTP or formal procedure.

Pre-emptive professional advice on the TTP application materially reduces rejection risk. Where rejection has occurred, the right next step depends on the rejection grounds and the underlying financial position — the assessment is typically beyond what the company's in-house team can complete without external input.

TTP fails in implementation where the company cannot maintain the agreed terms — typically by missing instalment payments, missing current tax payments, or failing to comply with reporting obligations. HMRC's response to TTP failure is structured:

• First default: HMRC typically writes to the company requesting payment and explaining the consequences of continued default. Sometimes the TTP can be reinstated if payment is brought current within a short window.
• Second default or continued failure: HMRC typically terminates the TTP. The full outstanding balance becomes immediately due. HMRC's enforcement progression resumes from where it would have been without the TTP — typically with the company in a worse position because additional time has passed and trade creditor pressure may have built up.
• Termination triggers active enforcement. Field Force visits, security demands, distraint, and (in larger cases) winding-up petitions can follow rapidly. The TTP failure context typically accelerates enforcement rather than slowing it.

Where TTP has failed, formal procedure is usually the right response. The company has demonstrated it cannot meet the TTP terms; continued ad hoc engagement with HMRC is unlikely to produce a sustainable outcome; the underlying position has typically deteriorated rather than improved. CVL, administration, or CVA — chosen on the basis of the underlying viability and creditor body — becomes the appropriate response.

Implementation failure is one of the principal points where IQ's involvement adds value. The company's in-house team typically cannot manage the transition from failed TTP to formal procedure without professional support. The first conversation tests which formal procedure is right, identifies any urgent steps required to protect the position, and outlines the realistic timetable.

TTP itself does not create personal exposure for directors. Directors signing or proposing a TTP are acting as agents of the company; the obligation is the company's, not theirs personally. But TTP outcomes affect the personal exposure landscape:

• Successful TTP reduces personal exposure. Where TTP successfully clears PAYE/NIC arrears, PLN risk under section 121C SSAA 1992 is materially reduced. Where TTP successfully clears VAT arrears, the risk of HMRC engagement that could escalate into joint and several liability for VAT fraud (in fraudulent cases) is reduced.
• Failed TTP can increase personal exposure. Where TTP failure follows a period in which directors continued to draw salaries while NICs went unpaid, PLN risk increases. Where TTP failure is followed by formal procedure, the trustee or liquidator's investigation may identify wrongful trading or misfeasance issues that arose during the TTP period.
• TTP must not preference HMRC over other creditors where the company is insolvent. Where the company is insolvent and the directors continue to pay HMRC under TTP while other creditors go unpaid, wrongful trading exposure under section 214 IA 1986 can crystallise. The right response in genuine insolvency is formal procedure, not TTP that preferences one creditor.

Directors with potential personal exposure on HMRC matters should treat TTP as one part of a wider strategy rather than as a standalone solution. Where the underlying position is uncertain, professional advice on both the corporate procedure and the personal liability framework is materially valuable.

Most straightforward TTP applications can be handled by the company's in-house team or accountant. The BPSS process is designed for direct taxpayer engagement; HMRC's preference is to deal with the company directly rather than through intermediaries for ordinary TTP cases. Three scenarios where professional engagement with a licensed insolvency practitioner adds clear value:

Pre-application strategic advice

Where the company is considering TTP but the right response is not clear — where the company may be insolvent rather than just illiquid, where personal exposure is a live consideration, where formal procedure may be a better answer — a short professional consultation tests the right response before the application is committed to. The cost is modest (typically a free initial consultation) and the benefit is clarity about the right route.

Post-rejection escalation

Where HMRC has rejected a TTP application, the right next step depends on the rejection grounds and the underlying financial position. Professional advice at this stage tests whether revised TTP, partial payment, refinancing, or formal procedure is the appropriate response. Continuing to push TTP after substantive rejection typically wastes time; the right alternative is often formal procedure with proper professional execution.

Implementation failure response

Where TTP has failed in implementation, the position requires urgent reassessment. HMRC enforcement typically accelerates after TTP termination; trade creditor pressure may have built up during the TTP period; the underlying financial position has often deteriorated rather than improved. The transition from failed TTP to appropriate formal procedure (CVA, administration, or CVL) requires professional execution and is materially better managed with engagement from a licensed insolvency practitioner.

This pillar sits beneath the HMRC Tax Debt umbrella as the solution hub of the cluster. The three specialist 'can't pay' pillars (VAT, PAYE, corporation tax) link in; this page links laterally to the corporate procedure pillars where formal procedure becomes appropriate.