TTP Cash Flow Forecast: A practical UK guide

HMRC's core question on every TTP application is the same: can the company actually deliver what it is proposing? The forecast is the evidence base for the answer. A TTP application without a forecast is asking HMRC to take the proposal on trust; a TTP application with a credible forecast is asking HMRC to evaluate a specific plan against specific numbers.

The forecast also serves three secondary purposes from HMRC's perspective. It demonstrates that the directors have actually thought through the plan rather than improvised it under pressure. It surfaces the assumptions for examination — if HMRC disagrees with a specific revenue assumption, the discussion can be specific rather than philosophical. And it creates a benchmark for monitoring — if HMRC accepts the TTP, the forecast becomes the plan against which subsequent performance is measured. A failed TTP that visibly diverged from a credible forecast is treated less harshly by HMRC than one that diverged from a forecast that should never have been accepted in the first place.

Smaller TTPs: forecast may not be required

For smaller TTP amounts (typically below £30,000 in arrears) where the company has a clean compliance history, HMRC's Business Payment Support Service (BPSS) can sometimes accept TTP applications without a formal forecast. The application is processed on the basis of the company's direct representations during the BPSS phone call, supported by recent management information rather than a structured forecast.

Even where a formal forecast is not strictly required, a one-page summary showing the company's ability to pay can materially strengthen the application. The phone call goes more smoothly when the director can reference specific numbers rather than describing the position in generalities.

Larger TTPs: forecast typically required

For larger TTPs (typically £30,000+ in arrears, or longer durations — over 12 months for VAT/PAYE, over 24 months for corporation tax), HMRC will typically request a formal cash flow forecast. The request usually comes during the BPSS call or shortly afterwards in correspondence. Forecasts requested at this stage are typically required to be 12 months in duration with monthly granularity.

Previously rejected applications: forecast usually required

Where a previous TTP application was rejected, any subsequent application is typically required to include a forecast — even where the underlying amount is modest. HMRC's position is that the previous rejection demonstrated insufficient evidence; subsequent applications need to remedy that.

If the previous rejection was driven by a weak forecast, the subsequent application needs a materially improved version of the forecast — not the same forecast resubmitted with adjustments. This is one of the scenarios where professional input on the forecast is most valuable: a second rejection typically closes off TTP as a route entirely, leaving formal procedure as the remaining option.

HMRC's reviewers (typically BPSS officers for smaller cases or Debt Management officers for larger ones) look for specific things when assessing a forecast:

• ›Realism. Are the revenue assumptions defensible against historical management accounts and the trading conditions that produced the arrears? A forecast that assumes a substantial revenue improvement without explanation is the most common rejection trigger.
• ›Tax line items. Does the forecast show payment of current VAT, PAYE, and corporation tax (where applicable) alongside the arrears schedule? Forecasts that show arrears repayment but no current tax payments are non-starters.
• ›Working capital coherence. Does the forecast reconcile with the company's working capital position? Receipts assumptions should match plausible debtor days; payment assumptions should match plausible creditor days.
• ›Cost discipline. Are operating costs realistic? Substantial cost reductions need explanation; cost increases need to be justified.
• ›Director drawings. Does the forecast show controlled director drawings? Forecasts that maintain pre-arrears director drawing levels while proposing arrears repayment typically signal that the directors have not yet adjusted to the position.
• ›Coherence with the application narrative. Does the forecast reconcile with what the application says about the cause of the arrears and the recovery? Inconsistency between narrative and numbers is a credibility signal HMRC notices.

Most TTP cash flow forecasts share a common structure. The format below reflects what HMRC typically expects — specific layouts vary, but the core components are consistent.

Period covered

12 months, with monthly granularity. The 12-month period serves three purposes: it covers a full annual cycle including seasonal variations; it spans across the typical TTP duration for VAT/PAYE arrangements; and it shows the position through the next year-end including the next corporation tax cycle. Some applications use 6-month or 9-month forecasts where the TTP is short and the underlying business is straightforward, but 12 months is the safer default.

Receipts section

Cash receipts by category. Typical line items:

• ›Sales receipts (broken into customer concentration buckets if relevant — e.g. 'Customer A', 'Customers B–D', 'Other customers').
• ›Other operating income (rental, sundry receipts).
• ›VAT collected from customers (separately from net sales receipts where the business is VAT-registered).
• ›Capital introductions (director loans, investor contributions, asset disposals).
• ›Refinancing proceeds (where refinancing is part of the plan).

The receipts section should reconcile to the company's recent management accounts. Substantial deviations from recent monthly receipts need explanation in the supporting narrative.

Payments section

Cash payments by category. Typical line items:

• ›Direct costs (cost of sales for trading businesses, principal supplier payments).
• ›Wages (gross including PAYE/NIC deductions if shown gross; net wages if PAYE/NIC shown separately).
• ›Premises (rent, rates, utilities).
• ›Operating costs (insurance, professional fees, marketing, IT, telephony, and so on).
• ›Director drawings (clearly identified).
• ›Loan/finance payments (HP, leasing, debt service).
• ›Other regular payments.

Payments should be itemised in enough detail to show that the company has thought through the cost base. A single line of "operating costs" for a substantial business signals a lack of detailed planning; granular itemisation signals that the directors have engaged with the position.

Net position and running balance

Each month: total receipts less total payments equals net cash flow. The running balance starts with the opening cash position and tracks the cumulative effect through the period. The running balance must remain positive throughout the period; a forecast showing the company going overdrawn at any point is functionally a forecast of failure.

Where the running balance is tight (positive but only by modest margins), the supporting narrative should address how the company will manage the tight months — typically through credit facility headroom, supplier payment timing flexibility, or specific operational levers.

Tax obligations row

Critical row. Shows the company's current tax obligations through the period:

• ›VAT payable each quarter (typically months 3, 6, 9, 12 of the forecast where the quarters align with the calendar).
• ›PAYE and NICs payable monthly.
• ›Corporation tax payable in the relevant month (9 months 1 day after the relevant year-end, or QIPs instalments for larger companies).
• ›Any other relevant taxes (CIS for construction, business rates if cash-flowed separately).

This row demonstrates the most important thing HMRC needs to see: the company can pay current taxes alongside the arrears repayment. Without this row, the forecast is functionally incomplete from HMRC's perspective.

Arrears repayment row

The proposed monthly payments under the TTP. Standard structure: total arrears divided by proposed period (e.g. £60,000 over 10 months = £6,000 per month). Interest accruing during the TTP period should be reflected if material.

The arrears repayment row sits below the current tax obligations row. Together they show HMRC the full picture of what the company is paying to HMRC each month.

A practical approach for finance teams or directors building the forecast:

1. 01
   Start with the management accounts.

   Pull the last 6–12 months of monthly management accounts as the baseline — the forecast should be defensible against this history.
2. 02
   Build the receipts assumptions.

   For each customer or revenue stream, project the next 12 months based on contracted work, pipeline, and seasonal patterns. Be conservative where uncertainty exists.
3. 03
   Build the payments assumptions.

   For each cost category, identify the recent monthly run rate and adjust for known changes (cost reductions, contract changes, planned investment).
4. 04
   Calculate net cash flow and running balance.

   If the running balance goes negative or tight at any point, the plan needs adjustment — the forecast cannot show a path to insolvency mid-period.
5. 05
   Add the tax obligations row.

   Calculate VAT, PAYE/NIC, and CT payable each month based on the projected position. This is non-negotiable — the forecast must show payment of these alongside arrears.
6. 06
   Add the arrears repayment row.

   Calculate the proposed monthly payment based on the TTP duration being requested. Test whether the running balance can absorb both current tax and arrears repayment.
7. 07
   Sense-check.

   Is the recovery plausible? Are the assumptions consistent with the application narrative? Does the position improve through the period or stay flat?
8. 08
   Build the supporting narrative.

   Explain the assumptions and the recovery. The narrative is part of the forecast package, not an optional extra.

Optimistic revenue assumptions

The single most common cause of forecast rejection. The forecast assumes a revenue improvement that is not supported by contracted work, pipeline visibility, or operational capacity. HMRC's reviewer compares the forecast revenue to recent management accounts and concludes the assumption is implausible.

Defence: revenue should be supported by specifics. 'Sales of £80,000 per month' is weak; 'Sales of £80,000 per month based on contracted work with Customer A (£40,000), framework agreement with Customer B (£25,000), and pipeline conversion at 60% of recent run rate (£15,000)' is materially stronger. Where revenue is projected to improve through the period, the recovery needs explicit drivers (new contract starting month 4, customer onboarding completing month 6, etc.).

Missing or unrealistic tax line items

Forecasts that show arrears repayment but do not separately show current VAT, PAYE, and CT payments are functionally incomplete. HMRC's analysis assumes the company is committing to both — the absence of current tax payments suggests either an oversight or an admission that the company cannot actually pay both.

Defence: include current tax obligations as a discrete row in the payments section, with the calculation visible in the supporting narrative. Even rough calculations are better than absence.

No supporting narrative

Numerical forecasts without explanatory narrative are reviewed less favourably than identical forecasts with narrative. The narrative is where the application explains why the assumptions are credible, what has changed to make the recovery achievable, and how the directors will manage the plan. Without it, HMRC's reviewer is left interpreting the numbers without context.

Defence: prepare a 1–2 page supporting narrative covering the cause of the arrears, what has changed, the assumptions, the recovery drivers, and the contingency planning. The narrative is part of the forecast package, not separate.

Inconsistency with management accounts

The forecast assumes a position that is not consistent with the company's actual recent performance. Costs in the forecast are lower than recent months without explanation; receipts are higher; the underlying margin profile has changed without justification.

Defence: the forecast should reconcile to recent management accounts. Where there is divergence, the supporting narrative should explain why. Reviewers will compare the forecast to the management accounts — unexplained divergence undermines credibility.

Failure to demonstrate the recovery

The forecast shows the company maintaining the position that produced the arrears — same revenue, same cost base, same margin — but assumes that arrears repayment is somehow possible from the same cash flow that did not pay the original tax. The implicit answer ('we will somehow find the money') is not credible.

Defence: the forecast must show what is changing. New contracts, cost reductions, refinancing, capital introduction, customer mix improvement — something has to be different. Without a recovery story, the forecast is asking HMRC to accept that the same business that produced arrears will somehow now also fund repayment.

The supporting narrative is a 1–2 page document accompanying the forecast. It is not optional. It typically covers:

• ›Cause of the arrears. A factual account of how the arrears arose (specific events, customer issues, market conditions). Honesty here is materially better than vagueness or evasion.
• ›What has changed. The specific changes that make the recovery plan achievable. New contracts, completed cost reductions, refinancing arrangements, customer recovery actions, market improvements.
• ›Assumptions in the forecast. Brief explanation of the key assumptions — revenue projections, cost run rates, working capital position. Reviewers should be able to test specific assumptions against the narrative.
• ›The recovery story. The arc from current position through to TTP completion. What does the position look like in month 6? Month 12? Where will the company be by the end of the TTP?
• ›Contingency. Brief acknowledgement of what the company will do if the recovery underperforms. This signals director awareness and protects the application from looking unrealistically optimistic.

Most TTP applications are made by the company directly through HMRC's Business Payment Support Service without IP involvement. Professional input on the cash flow forecast is most valuable in specific scenarios:

• ›Previously rejected application. Where a prior TTP application has been rejected, professional review of the forecast before resubmission materially improves prospects. A second rejection typically closes off TTP entirely.
• ›Substantial arrears (£100,000+). Larger amounts justify more careful preparation. The cost of a forecast review is small compared to the consequence of rejection.
• ›Borderline solvency. Where the company is close to insolvency, the forecast must demonstrate viability convincingly — and the practitioner can also test whether TTP is genuinely the right route or whether formal procedure is more appropriate.
• ›Complex business model. Multi-entity groups, project-based businesses (construction), or seasonally complex businesses (hospitality) typically benefit from professional input on forecast structuring.
• ›Director-personal exposure. Where Personal Liability Notice or wrongful trading exposure is in play, the forecast affects director-personal stakes — not just corporate ones — and professional review serves both the corporate and the director-personal positions.

Professional input typically takes one of three forms: (a) review of a draft forecast prepared by the company; (b) joint preparation of the forecast with the company's finance team; or (c) full preparation of the forecast on behalf of the company. The right level depends on the company's internal capability and the complexity of the position.

If you are preparing a TTP cash flow forecast and want professional review before submission, the first step is a conversation with a licensed practitioner. The conversation will assess whether TTP is genuinely the right route (or whether formal procedure is more appropriate), review the forecast structure and assumptions, identify the issues that typically cause rejection, and where appropriate help with the supporting narrative. There is no charge for the initial consultation and no obligation arising from it. Confidentiality is absolute.

At IQ Insolvency, every engagement is led by a licensed insolvency practitioner from the first conversation. Most TTP applications are made by the company directly without ongoing IP involvement — our role is typically focused review and strategic advice rather than full application execution. Where formal procedure becomes appropriate (because TTP is not viable, has been rejected, or has failed), the IP who advised on the TTP handles the case through to final report.

This spoke sits beneath the Time to Pay Arrangements pillar. The pages below cover the parent pillar, the broader HMRC umbrella, and the procedural pillars where formal procedure becomes the response if TTP is not viable.