With almost four decades of experience in business, Mike Smith is one of the founders of Company Debt and one of the UK’s most experienced mediators with HMRC.
Having previously owned several of his own successful companies and occupied senior roles as a director within both Legal and General and Sun Alliance during separate periods of his career, Mike founded Company Debt with a genuine desire to help stressed directors in challenging circumstances. He is also an expert in the alternative finance sector.
HMRC’s rejection is not the end, but it does increase pressure quickly. Interest on overdue tax continues to accrue, and HMRC can move from reminders to enforcement action if the debt remains unpaid. When that refusal email or letter arrives and cash flow turns critical, every hour counts.
This guide outlines what typically happens next, the options still available, and the practical steps you should take to stabilise your business.
A Time to Pay (TTP) arrangement is an installment plan agreed with HMRC to clear outstanding tax over time. It is available where a business cannot pay immediately but can do so within a realistic period.
TTP arrangements can cover common business taxes such as PAYE, VAT and Corporation Tax. They are typically short-term arrangements (often a few months), though longer periods may be agreed in some cases where justified. Interest continues to accrue on the outstanding balance, and any penalties already incurred remain payable.
If you keep to the agreed plan and meet all new tax obligations on time, HMRC will usually not pursue further enforcement while the arrangement is in place.
Rejection means HMRC has not accepted your proposal. Default is different: HMRC previously agreed a plan, but you failed to meet its terms, which can lead to renewed enforcement action.
HMRC’s basic acceptance criteria
All required tax returns are filed
The business cannot pay immediately but can clear the debt over time
The proposal is realistic and affordable
Future taxes will be paid on time
Supporting financial information is provided where requested
Why HMRC Says No: Top Rejection Triggers
HMRC will usually refuse a Time to Pay request where the proposal lacks credibility, compliance or supporting evidence.
Common reasons include:
Unrealistic repayment terms that are not supported by cash flow
Missing or overdue tax returns
Poor compliance or payment history
Insufficient financial evidence to support the proposal
Before reapplying, make sure you can demonstrate:
All tax returns are submitted and up to date
The repayment plan matches actual available cash
Supporting documents (bank statements, forecasts) are available
Any past compliance issues are explained and addressed
The business can meet future tax liabilities on time
What Happens After a Rejection
Once HMRC rejects a Time to Pay request, it will normally expect payment in full. If the debt is not paid, HMRC may begin or continue its debt collection process.
There is no fixed timeline, but the process typically involves increasing pressure:
Further contact from HMRC requesting payment
Referral to HMRC’s debt management teams
Possible use of private debt collection agencies
Consideration of enforcement action if the debt remains unpaid
Interest on overdue tax continues to run from the original due date until payment is made. Penalties may also apply depending on the tax type and how late payment or filing is.
The key point: rejection removes the protection of an agreed plan, meaning HMRC is free to escalate recovery action.
HMRC’s Enforcement Options Once a TTP Is Rejected
If the debt remains unpaid and no arrangement is agreed, HMRC has several legal tools available. These are not applied in a fixed order and timing varies by case.
Common enforcement actions include:
Continued debt collection activity, including letters, calls or use of debt collection agencies
Taking control of goods (also known as enforcement action), where HMRC can seize and sell business assets to recover the debt
Legal proceedings, which may include court action in some cases
Insolvency action, including a winding-up petition for companies
Taking control of goods can occur without a prior court judgment, but must follow the statutory process under the Taking Control of Goods Regulations.
If a winding-up petition is issued and granted by the court, the company enters compulsory liquidation and control passes to the Official Receiver or an insolvency practitioner.
Damage-Limitation Moves to Make Within 48 Hours
Act quickly to keep your options open. Your goal is to demonstrate cooperation and improve your position before HMRC escalates further.
Priority checklist:
Contact HMRC as soon as possible to discuss next steps
Pay what you can toward the debt to reduce the balance and ongoing interest
Submit any outstanding tax returns immediately
Prepare a realistic cash-flow forecast
Seek advice from an accountant or licensed insolvency practitioner
Ignoring HMRC communication is one of the fastest ways to trigger escalation.
Your Main Options Now: Side-by-Side Comparison
Renegotiate TTP
Short-term financing
Company Voluntary Arrangement
Voluntary liquidation
Administration
Speed to implement
Can be quick if information is ready
Depends on lender approval
Requires formal proposal and creditor vote
Requires formal appointment
Requires formal appointment
Cost
Interest only on tax debt
Fees and interest
Professional fees
Professional fees
Professional fees
Creditor protection
None until agreed
None
Protection once approved
Ends company
Moratorium on action
Key requirement
Realistic proposal
Ability to repay borrowing
Creditor approval (75% by value of those voting)
Insolvent company
Rescue or sale strategy
How to Strengthen a Second Time to Pay Proposal
A second request must address the reasons for the original rejection.
Steps to improve your chances:
Prepare accurate and up-to-date financial forecasts
Provide evidence of available funds or financing
Propose a shorter, realistic repayment period
Demonstrate improved compliance going forward
Ensure all figures match submitted returns
HMRC is more likely to agree where the proposal is clear, supported and achievable.
When a Company Voluntary Arrangement Can Beat a Second TTP
If tax arrears are part of wider financial distress, a Company Voluntary Arrangement (CVA) may be more appropriate.
A CVA is a formal agreement between a company and its creditors. It requires approval from creditors representing at least 75% (by value) of those who vote.
Once approved, it binds all unsecured creditors, including HMRC.
A CVA can:
Consolidate multiple debts into one plan
Allow the business to continue trading
Provide structured repayments over time
However, it requires detailed preparation, professional involvement and creditor support.
Last-Resort Routes: Administration or Voluntary Liquidation
If the business is no longer viable, formal insolvency procedures may be necessary.
Administration aims to rescue the business or achieve a better outcome for creditors than liquidation. A statutory moratorium prevents most creditor action while the process is underway.
Creditors’ Voluntary Liquidation (CVL) is used where the company cannot continue. Assets are sold and proceeds distributed to creditors in legal order.
Directors must act in creditors’ interests once insolvency is likely. Continuing to trade without regard to this duty can lead to personal liability.
Clearing Up Common Misunderstandings
Rejection is not final: you can reapply with a stronger proposal
Interest continues on overdue tax until paid
HMRC can take enforcement action if no arrangement is agreed
Company debts generally remain with the company, not the directors (subject to limited exceptions)
Early engagement improves your chances of reaching a solution
FAQs
1) Will HMRC reconsider if I make a lump-sum payment?
Sometimes. A payment can improve your position, but HMRC will still assess affordability and compliance before agreeing a plan.
2) How soon can I reapply?
There is no fixed waiting period. You can reapply once you have addressed the reasons for rejection.
3) Does a rejected TTP affect my company’s credit rating?
The rejection itself is not publicly recorded. However, further legal action (such as court proceedings or insolvency) can affect creditworthiness.
4) Can HMRC seize personal assets after a company TTP rejection?
Generally no, as the debt belongs to the company. Exceptions can apply in specific legal circumstances, such as certain personal liability rules.
5) What if only one type of tax is overdue?
HMRC can still take action on that debt. Overall compliance is considered when assessing any arrangement.
6) Does interest stop while negotiating?
No. Interest continues on overdue tax until it is paid.
7) Can I lend money to my company to clear the debt?
Yes, but recovery of that loan is not guaranteed if the company later becomes insolvent.
8) Do I need professional help to negotiate with HMRC?
Not always, but professional advice can improve the quality of your proposal and help avoid mistakes.
9) Is previous financial hardship still relevant?
It may provide context, but HMRC focuses on whether the proposal is currently affordable and sustainable.
10) What evidence does HMRC expect?
Typically financial forecasts, bank statements, details of liabilities and proof of future affordability.
11) Can HMRC still take action if I’m trying to negotiate?
Yes. Until an agreement is formally accepted, HMRC can continue its recovery process.
12) What records should I keep?
Keep all HMRC correspondence, financial records, submitted returns and evidence of payments or proposals.
Your Next Step: Speak to an Insolvency Practitioner Today
If cash flow is tight and HMRC has rejected your proposal, take advice quickly.
A licensed insolvency practitioner or experienced adviser can:
Review your financial position
Assess whether a revised TTP is viable
Advise on formal options if needed
Help you understand your duties as a director
Delaying reduces your options. Acting early gives you the best chance of stabilising the business and avoiding enforcement.
