HMRC Time to Pay arrangement help

Q: What is a Time to Pay arrangement with HMRC?

An agreement to pay an overdue tax bill in monthly instalments rather than in one amount. HMRC checks that the plan is affordable and clears the debt as quickly as is realistic; if a plan cannot be agreed, HMRC asks for payment in full. Arrangements exist for Self Assessment, VAT, PAYE and Corporation Tax debts.

Q: What will HMRC ask me for when agreeing a payment plan?

Whether you can pay anything up front, how much you can pay monthly, what other taxes are coming due, what you earn and spend, and what savings or investments you hold. HMRC expects savings and realisable assets to be used to reduce the debt first. For companies, HMRC tests whether the proposal is realistic and affordable.

Q: Can a limited company get Time to Pay for VAT, PAYE or Corporation Tax?

Yes, but HMRC scrutinises company proposals more commercially: it tests realism and affordability, expects the debt to be reduced first by releasing assets where possible, and may ask directors about putting personal funds into the business, accepting lending or extending credit.

What is the situation?

The Self Assessment balance, the VAT quarter or the Corporation Tax bill is due and the money is not there. That happens to sound businesses: a large debtor pays late, a contract slips, a personal bill lands in the same month. The mistake is silence. HMRC's own guidance is built around contact before the position hardens (gov.uk/difficulties-paying-hmrc), and a realistic proposal made early is treated very differently from one extracted after enforcement has begun.

How does Time to Pay actually work?

HMRC agrees instalment plans where the amount offered is affordable and clears the debt as quickly as is realistic. Some Self Assessment and other debts can be set up as a payment plan online, subject to eligibility conditions HMRC applies through its online service; outside those cases, the arrangement is agreed by phone. Either way HMRC asks the same questions: what you earn, what you spend, what you owe elsewhere, and what savings or assets you hold, because it expects savings and realisable assets to be used to reduce the debt first (gov.uk, setting up a payment plan). For company debts, HMRC tests whether the proposal is realistic and affordable, and may ask directors about putting personal funds in or extending credit.

What do we prepare before HMRC is approached?

Three things. First, we verify the liability itself; a surprising number of "cannot pay" cases shrink once estimated assessments are displaced, returns corrected or payments on account reduced to reflect actual income. Second, we build the income and expenditure statement or company cash-flow forecast that supports the monthly figure, so the offer is evidenced rather than hopeful. Third, we set the proposal at a level you can sustain, because a plan that fails is worse than a longer plan that holds. Then we handle the conversation with HMRC and confirm the arrangement.

What does it cost to do nothing?

Left alone, the debt grows and the options narrow. Interest is charged on tax paid late, and Self Assessment carries late payment penalties of 5% of the unpaid tax at 30 days, 6 months and 12 months (gov.uk, Self Assessment penalties). If HMRC gets no contact and no payment, it can move to enforcement: collection of the debt through the powers described at gov.uk, which is a materially worse position from which to negotiate. Contact first, with a credible plan, keeps the matter in the payment column rather than the enforcement column.

What if the bill relates to a disclosure or an enquiry?

Payment difficulty often surfaces at the point a disclosure or tax investigation settles. Payment arrangements in those cases are agreed with the HMRC team handling the matter, ideally before the disclosure or settlement is submitted, and we run the two workstreams together so the numbers and the payment plan are presented as one coherent position.

Who handles Time to Pay engagements?

Call us and a senior manager will take your enquiry personally. Vision Consulting is a London firm of chartered accountants, founded in 2002 and regulated by the ICAEW, working from offices at the Gherkin, Cavendish Square and Gants Hill.

Call 020 8554 2135 or email info@visionconsulting.co.uk. First conversations are confidential and at no cost.

Frequently asked questions

What is a Time to Pay arrangement with HMRC?

It is an agreement to pay an overdue tax bill in monthly instalments rather than in one amount. HMRC checks that the plan is affordable for you and clears the debt as quickly as is realistic; if a plan cannot be agreed, HMRC asks for payment in full. Arrangements exist for Self Assessment, VAT, PAYE and Corporation Tax debts, and each is assessed on the actual income, spending and assets behind the proposal. The stronger and better evidenced the proposal, the smoother the agreement.

Can I set up an HMRC payment plan online?

For some debts, yes. HMRC runs an online service that checks eligibility and lets qualifying taxpayers set up a plan without speaking to anyone, using their reference number, bank details and income and spending figures. Eligibility depends on conditions HMRC applies within the service, including the type and age of the debt. Where the online route is not available, the plan is agreed by phone, and that is where a prepared, evidenced proposal earns its keep. The starting point either way is gov.uk/difficulties-paying-hmrc.

What will HMRC ask me for when agreeing a payment plan?

Expect questions covering whether you can pay anything up front, how much you can pay monthly, what other taxes are coming due, what you earn, what you spend, and what savings or investments you hold. HMRC expects savings and realisable assets to be used to reduce the debt before instalments are agreed. If you have had independent debt advice, HMRC accepts a Standard Financial Statement as evidence of income and spending. For companies, HMRC tests whether the proposal is realistic and may ask directors about personal funds or lending.

Does interest still run during a Time to Pay arrangement?

Interest is charged on tax paid after its due date, so a debt cleared by instalments costs more than one paid on time; that is the price of the breathing space. The arrangement's value is in stopping the position deteriorating further and keeping the debt out of enforcement. Self Assessment late payment penalties of 5% of the unpaid tax arise at 30 days, 6 months and 12 months, which is a strong argument for getting an arrangement in place early rather than late.

What happens if I simply do not contact HMRC?

The debt does not pause. Interest accrues, late payment penalties are triggered at the statutory dates, and HMRC moves toward recovery action under its published debt enforcement powers. Negotiating after enforcement has started is possible but happens on worse terms and with less goodwill. The consistent pattern across cases is that early contact with a credible, evidenced proposal produces a manageable plan, and silence produces escalation.

Can a limited company get Time to Pay for VAT, PAYE or Corporation Tax?

Yes. HMRC agrees plans for company tax debts, but scrutinises them more commercially: it asks how the company will pay as quickly as it can, tests the proposal's realism and affordability, and expects the debt to be reduced first by releasing assets such as stock, vehicles or shares where possible. Directors may be asked about putting personal funds into the business, accepting lending or extending credit. We build the cash-flow case so those questions are answered before they are asked.

This is general information, not advice. Your position depends on your circumstances. Speak to us before acting.