HMRC Time to Pay Arrangements (TTP)

HMRC’s Time to Pay Arrangements (TTP) offer a way for UK limited company directors to manage tax arrears by spreading overdue payments over an agreed schedule.

This can alleviate the immediate financial pressure of settling tax debts in full. To qualify, businesses must demonstrate genuine hardship and propose a reasonable repayment plan.

In this article, we’ll explore what Time to Pay Arrangements are, who is eligible, and how you can apply. We’ll also discuss the implications of entering such an arrangement and consider alternative options if this route isn’t suitable for your circumstances.

What is an HMRC Time to Pay Arrangement?

A Time to Pay (TTP) arrangement is a flexible payment plan with HMRC that allows you to settle your tax debts in instalments over a period of time rather than paying the full amount immediately when they’re due. This arrangement can cover various taxes, including VAT, PAYE, Corporation Tax, and Self Assessment, making it a versatile option for directors facing cash flow challenges.

For directors struggling with cash flow, a TTP arrangement can provide much-needed breathing room by spreading the tax liability over manageable monthly payments. It is important to note that, although interest on late payments will still accrue during a TTP, entering into such an arrangement can help avoid certain penalties if you adhere to the agreed terms.

A TTP is not a formal insolvency procedure; rather, it is an informal agreement that requires mutual consent between you and HMRC. Typically, these plans are short-term, often lasting less than 12 months. However, longer arrangements may be considered in exceptional circumstances but usually require managerial approval from HMRC. The key to securing a TTP is demonstrating genuine financial difficulty and a realistic ability to meet the proposed instalments.

Pros, Cons and Considerations of a Time to Pay Arrangement

A Time to Pay (TTP) arrangement with HMRC allows UK limited company directors to manage tax arrears without facing immediate enforcement actions or penalties. This helps businesses maintain cash flow. However, directors must diligently adhere to the obligations of a TTP.

Pros

• Avoidance of Immediate Penalties: Agreeing to a TTP prevents penalties that would otherwise accrue from late payments.  
• Preservation of Cash Flow: Spreading tax payments over time helps maintain liquidity, crucial for day-to-day operations.  
• Flexibility: The arrangement can be adjusted if your financial circumstances change, providing some breathing room.  
• Reduced Stress: Knowing that HMRC will not take enforcement action while you comply with the plan can alleviate financial pressure.

Cons and Considerations

• Interest Charges: Interest will continue to accrue on unpaid tax during the TTP period, potentially increasing the total amount payable.  
• HMRC Scrutiny: Your financial activities may be closely monitored to ensure compliance with the agreement.  
• Obligations for Directors:  
  • Consistent payments must be made as agreed.  
  • Accurate financial disclosures are essential to maintain trust with HMRC.  
  • Timely submission of all tax returns is mandatory to avoid jeopardising the arrangement.

Who is Eligible for a Time to Pay Arrangement?

To qualify for a Time to Pay (TTP) arrangement with HMRC, businesses must demonstrate genuine financial difficulty and a commitment to compliance. HMRC generally looks for the following:

• Genuine Inability to Pay: You must prove that your business cannot pay the tax in full by the due date. This involves showing evidence of cash flow issues or unforeseen expenses that have impacted your ability to pay.  
• Good Compliance History: HMRC favours businesses with a history of timely payments and up-to-date tax filings. If you have outstanding returns, you should file them before requesting a TTP.  
• Realistic Repayment Proposal: Your repayment plan should be feasible, demonstrating how you will clear the debt within an acceptable timeframe. HMRC expects the debt to be paid off as quickly as possible without causing further financial strain.  
• No Concurrent Debts: Ideally, you should not have other unmanaged outstanding debts with HMRC. They may prefer to consolidate them into one manageable plan if you do.

^[1]Trusted Source – GOV.UK – Setting up a payment plan

Proving Affordability

When proving affordability to HMRC, have the following documents ready:

• Bank statements: To verify cash flow and available funds.  
• Cash flow forecasts: To project future income and expenses.  
• Profit and loss statements: To show business performance.  
• Details of assets: Including property or investments that could be leveraged.  
• List of creditors: To provide context on other financial obligations.

By presenting these documents, you can build a strong case for why a TTP arrangement is necessary and how it can be realistically managed.

The Application Process

To apply for a Time to Pay (TTP) arrangement with HMRC, start by contacting the HMRC helpline as soon as you realise you cannot meet your tax obligations on time. This proactive approach increases your chances of securing a favourable arrangement and may help avoid additional penalties.

1. Prepare Financial Information: Gather detailed financial forecasts and statements that clearly demonstrate your current financial hardship. This includes cash flow forecasts, profit and loss statements, and any other relevant documentation that supports your case.
2. Demonstrate Genuine Hardship: Clearly explain why you are unable to pay the tax in full. Providing a transparent account of your situation is crucial, whether due to a temporary dip in revenue or unforeseen expenses.
3. Negotiate Terms: During your call with HMRC, be prepared to discuss a realistic repayment plan. HMRC will expect you to propose the highest affordable monthly payment and may ask for an upfront payment if possible. Be honest about what you can manage without jeopardising future payments.
4. Keep Accurate Records: Document all communications with HMRC and ensure you retain copies of any agreements or correspondence. This will be vital if any disputes arise later.
5. Maintain Ongoing Payments: Once an agreement is reached, ensure that all payments are made on time and that any new tax liabilities are settled promptly to remain compliant with the terms of the TTP.

Remember, prompt communication is key throughout this process. Delays or lack of transparency can lead to complications or even application refusal.

Potential Outcomes & Consequences

Applying for a Time to Pay (TTP) arrangement with HMRC can result in acceptance, partial acceptance, or rejection. Acceptance allows you to pay your tax debt in instalments, easing financial pressure. Partial acceptance means HMRC agrees to a plan but may alter terms, such as shortening the repayment period. If rejected, consider alternative solutions, which will be discussed later.

Defaulting on a TTP arrangement has serious repercussions. Interest accrues on unpaid taxes, and missed payments can trigger penalties initially avoided by the plan. HMRC might also enforce debt collection through agencies or asset seizure.

To prevent these issues, directors should remain transparent and proactive. Promptly inform HMRC of any financial changes and adhere to the payment schedule. This maintains the arrangement and shows good faith, which can be advantageous in future negotiations.

Negotiating and Finalising the Arrangement

To negotiate a Time to Pay (TTP) arrangement with HMRC, start by contacting their Payment Support Service. Depending on your eligibility and preference, you can do this by phone or online. Approach this process well-prepared and professionally. Gather all necessary financial documents, such as cash flow statements and tax reference numbers, to present a clear picture of your financial situation.

When speaking with HMRC, honesty is paramount. Clearly explain your financial difficulties and provide evidence of your inability to pay the full amount immediately. Be ready to discuss any steps you have already taken to manage your finances, such as cost-cutting measures or attempts to secure additional funding. Propose a realistic payment plan that reflects what you can afford monthly without jeopardising your business’s viability.

During discussions, expect HMRC to assess your proposal against their criteria for affordability and sustainability. They typically prefer arrangements that clear the debt within 12 months, although longer terms may be considered for larger debts with managerial approval. Once agreed, HMRC will formalise the arrangement, often setting up a Direct Debit for monthly payments.

Common Negotiation Mistakes

Avoid common pitfalls during negotiations by ensuring full disclosure of your financial situation. Underestimating your ability to pay or providing incomplete information can lead to mistrust and refusal of the arrangement. Additionally, proposing unrealistically low repayments without justification can result in HMRC pushing back for more substantial payments. Always aim for transparency and reasonableness in your proposal to foster a cooperative relationship with HMRC.

If you’re unsure how to approach the negotiation or prepare the necessary documentation, consider seeking advice from a licensed insolvency practitioner such as ourselves. We can offer valuable insight into the process, help prepare your proposal, and even negotiate on your behalf.

Alternatives to Time to Pay

If a Time to Pay Arrangement with HMRC is not feasible, UK limited company directors have several alternatives. Each option has its own implications, so professional advice is crucial to determine the best course of action.

• Company Voluntary Arrangement (CVA): A formal agreement with creditors to repay a portion of the debts over time, often with some debt forgiveness. It helps restructure your company’s finances while keeping the business operational. It requires the involvement of an insolvency practitioner and creditor approval, including HMRC.  
• Short-Term Deferral: If cash flow issues are temporary, you might negotiate a short-term deferral with HMRC, agreeing to pay the full amount by a new deadline rather than in instalments. This suits businesses expecting imminent funds, such as pending client payments.  
• Debt Management Plan: A debt management plan can consolidate debts into one manageable payment for those with multiple creditors. While not specific to tax debts, it can include HMRC if they agree to participate.  
• Insolvency Solutions: In severe financial distress, formal insolvency procedures like administration or liquidation might be necessary. These routes involve significant consequences, such as potential loss of control over the business and impact on credit ratings.  
• Breathing Space Scheme: This scheme, primarily for individuals, offers temporary relief from creditor enforcement, including HMRC. It provides a 60-day pause on debt recovery actions, allowing time to seek advice and plan a way forward.

Each alternative has pros and cons, and selecting the right one depends on your company’s circumstances. Engaging with an insolvency practitioner or financial adviser can provide clarity and help navigate these complex options effectively.

Expert Advice and Next Steps

If HMRC has refused your Time to Pay arrangement proposal or you’re facing overwhelming pressure from their Debt Management team, it’s crucial to seek expert guidance promptly. At Company Debt, our team of licensed insolvency practitioners has decades of experience helping companies navigate these challenging situations.

We understand that every case is unique, and we’ll work closely with you to assess your specific circumstances and explore all available options. Whether it’s re-negotiating with HMRC, considering alternative repayment strategies, or exploring formal insolvency procedures, we’ll provide clear, practical advice tailored to your needs.

Our team has an extensive track record of successfully resolving HMRC debt issues. We’re committed to protecting your interests and finding the best possible outcome for your company. We offer a free, confidential consultation to discuss your situation and provide expert recommendations on the best way forward.

Call us now on 0800 074 6757 to speak directly with one of our knowledgeable advisors, or use our live chat service during working hours for immediate assistance.

FAQs on Time to Pay Arrangements

References

The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.

You can learn more about our standards for producing accurate, unbiased content in our editorial policy here.

1. Trusted Source – GOV.UK – Setting up a payment plan