Can you pay HMRC in instalments?

How does an HMRC Time to Pay Arrangement work?

HMRC understands that company cash flow is not always stable and there are times when viable businesses cannot pay a tax bill on time. If you have tax arrears or know you will not be able to make a forthcoming payment, you can apply for a formal payment plan called a Time to Pay (TTP) Arrangement. 

A Time to Pay Arrangement enables you to pay what you owe over a typical period of six months, although it can give you up to 12 months in certain circumstances. During that time, you make monthly payments to clear your tax debts while also paying your ongoing tax bills as they arise. 

You must negotiate a payment plan with HMRC to clear the debt as quickly as possible by making affordable monthly payments. Your HMRC Time to Pay Arrangement will cover all outstanding amounts owed, including penalties and interest. HMRC will add interest until you clear the debt, but you will not receive additional penalties if you stick to the agreement.

Which business taxes can I pay in instalments?

It’s possible to negotiate a Time to Pay Arrangement with HMRC for Corporation Tax, PAYE, VAT and Self Assessment arrears. There is no standard Time to Pay Arrangement. HMRC will assess your application based on your financial circumstances and agree to instalments based on how much you can afford to pay. You are likely to be eligible if you:

• Owe £50,000 or less
• Can pay off the debt in the next 12 months
• Do not have any ongoing instalment plans
• Have filed all your tax returns
• Have a record of paying your taxes on time

You can usually apply for a Time to Pay Arrangement online through your Government Gateway account. However, if you have multiple tax debts, your debts are high or you use the VAT cash accounting or annual accounting schemes, you will usually have to call HMRC using the numbers below:

• PAYE missed payments - 0300 200 3819
• Self Assessment missed payments - 0300 200 3820
• VAT missed payments - 0300 200 3831
• Corporation Tax missed payments - 0300 200 3840

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How do I arrange to pay HMRC in instalments?

To set up a payment plan online, you’ll need your unique taxpayer reference number, bank account details and information about the payments you’ve missed. You’ll also need to think about how much you can comfortably afford to pay each month and how long you’ll need to repay the outstanding amount in full. 

It’s important not to be overly ambitious. HMRC may refuse your proposal if it does not think you can comfortably afford the payments. It can also put the business under financial pressure and cause you to miss payments further down the line, which could lead to the cancellation of the arrangement. 

If you call HMRC to arrange a payment plan, the interviewer will want to know:

• Why you are unable to pay your tax bills on time
• What efforts you have made to pay the outstanding amount
• The long-term financial viability of your business
• The likelihood of a payment plan being successful

The interviewer may also ask for budgets, cash flow forecasts and details of assets and liabilities, so make sure you’re prepared. 

Making an HMRC Time to Pay Arrangement can be complex, particularly if you have VAT and PAYE arrears. That’s why some businesses prefer to use a professional to negotiate on their behalf. We have vast experience negotiating payment plans with HMRC and know how to put affordable arrangements in place.   

Can HMRC cancel my payment plan?

Once you have made a Time to Pay Arrangement, you must adhere to it or HMRC may withdraw from the agreement. If you default on your payment plan, HMRC will reassess the viability of the plan and your company's financial situation.

If it believes there is too much risk, it can immediately cancel the arrangement, apply penalties and call in the total debt. If you cannot pay the debt, it could issue a Winding Up Petition to force your company into liquidation to prevent you from accruing further tax debts you cannot pay. That’s why it’s so important to ensure your initial repayment proposal is affordable.

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What happens if HMRC refuses my Time to Pay proposal?

There are various reasons why HMRC may not accept your plan to pay in instalments:

• It may doubt the long-term financial viability of your company
• The monthly payments you have proposed may not be affordable
• You could have a track record of not paying HMRC on time
• It may feel you are making a choice not to pay and plan to use the money to repay other creditors or expand the business 
• You are not proposing to clear the debt in the shortest possible time

You still have options if you cannot negotiate a plan to pay HMRC in instalments. You could explore alternative funding methods, such as asset-based lending and invoice finance. They can help you free up cash quickly so you can pay your tax arrears. 

Alternatively, if you have multiple creditors, insolvency procedures like a Company Voluntary Arrangement (CVA) and Administration may enable you to rescue the business and continue trading. 

Get expert Time to Pay advice

If you want to know more about HMRC Time to Pay Arrangements, would like someone to negotiate with HMRC on your behalf or have been refused a payment plan in the past, please get in touch for a free consultation.

Our almost 100 in-house licensed Insolvency Practitioners have helped thousands of directors in your position and will give you the best possible chance of putting a plan in place. We will also discuss your circumstances, assess your finances and outline alternative options that may be a better fit.