Failed Time to Pay arrangement — what to do next

HMRC treats three events as a TTP failure:

• ›Missed instalment — failure to make a scheduled payment by the due date. HMRC's systems flag this within days.
• ›Failure to keep current tax obligations up to date — the standard TTP terms require ongoing VAT, PAYE and Corporation Tax to be paid on time. New arrears breach the arrangement.
• ›Material adverse change — loss of a major customer, accumulation of new debt, or other change in circumstances HMRC view as undermining the arrangement basis.

Most TTPs that fail do so because new tax obligations accumulate. A company that couldn't pay historic VAT often struggles to keep current VAT current, particularly if trading hasn't improved.

The table above summarises the standard sequence. The pace varies by debt size and HMRC team — substantial debts (£50,000+) typically see faster escalation. Multiple defaults (where the company has previously failed a TTP) typically see no second chances: HMRC moves directly to enforcement.

HMRC is materially less willing on second attempts:

• ›First TTP — HMRC's standard policy supports TTPs for companies in temporary difficulty. Most reasonable proposals are accepted.
• ›Second TTP (after first defaulted) — HMRC requires demonstrable changed circumstances. The director needs to explain why this proposal will succeed where the previous one didn't. Larger upfront payment typically required (often 30–50% of the debt).
• ›Third+ TTP — rarely available. HMRC view the company as serially unable to meet its obligations and prefer formal enforcement.

Where a second TTP is being sought, professional support materially improves the prospects. An insolvency-experienced accountant or IP can frame the proposal in a way HMRC takes seriously and identify the upfront commitments that demonstrate genuine ability to perform. See the TTP cash-flow forecast framework.

1. Settle the debt in full

If funds are available — typically from a non-company source (personal capital, family loan, third-party investor, refinancing) — settling the debt in full terminates HMRC enforcement. The most certain outcome but typically the most expensive.

2. Negotiate a second TTP

As above. Realistic only with demonstrable changed circumstances and (typically) substantial upfront payment. Professional involvement recommended.

3. Refinance through a third-party lender

Specialist HMRC refinance lenders exist — they pay HMRC in full and the company repays the lender on commercial terms (typically 12–36 months). Useful where the company is viable but doesn't have the immediate capital. Interest rates substantial (typically 1.5–3% per month). Director personal guarantee usually required.

4. Initiate a voluntary procedure

If the company isn't viable — or the HMRC debt is the symptom of broader insolvency rather than a temporary cashflow issue — voluntary procedure may be the right answer. CVL where the business has no viable future; CVA where the business is viable but debt is unmanageable (restructures the HMRC debt over 3–5 years alongside other unsecured debt); administration in rare HMRC-driven cases where a rescue prospect exists.

• ›Don't take new credit to fund TTP payments — this typically constitutes wrongful trading under s.214 IA 1986. Directors are personally liable for losses caused by continued credit-taking when insolvency was inevitable.
• ›Don't transfer assets to a connected company to avoid HMRC enforcement — transactions at undervalue under s.238 IA 1986; misfeasance under s.212; personal liability.
• ›Don't ignore HMRC's communications — silence accelerates enforcement; engagement preserves options.
• ›Don't pay directors, family or favoured creditors ahead of HMRC — preferences under s.239 IA 1986; recoverable from recipient (and from director personally as misfeasance).

• ›Personal Liability Notice (PLN) — HMRC's power under s.121C Social Security Administration Act 1992 to make directors personally liable for unpaid PAYE/NIC where misconduct is established. See the PLN framework.
• ›HMRC security demand — HMRC's power under s.26 VAT Act 1994 to require security for current and future VAT obligations. See HMRC security demand.
• ›Director disqualification — Crown debt accumulation is one of the principal grounds for disqualification under Schedule 1 CDDA 1986. See director disqualification.
• ›Wrongful trading — if continuing to trade while HMRC debts accumulate was unreasonable, s.214 IA 1986 personal liability for the additional loss. See wrongful trading.

For the TTP forecast framework, see TTP cash-flow forecast. For HMRC's winding-up petition response, see HMRC winding-up petition — what to do. For the Crown preference framework, see Crown preference. For director personal exposure, see Director duties in financial difficulty.