If you are worried about tax arrears, you are not alone. A Time to Pay arrangement lets you spread payments and protect cash while you steady the business. This guide explains the process in plain English. You will see what HMRC wants to see, how to build a simple 12 week cash flow, and what to say when you contact HMRC. Templates and a full evidence checklist are included.
At Anderson Brookes, our aim is to help you to act early and with confidence. If you need advice from our licensed insolvency practitioners, we’re just a call or a click away.
Time to Pay Agreements: What HMRC Expects
HMRC wants to know two things. First, that you cannot clear the arrears in one payment. Second, that you can keep to a fair plan while staying up to date with current taxes. Here are some notable aspects to ensure you include:
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Returns filed and current or future taxes kept up to date. This shows compliance and reduces risk for HMRC.
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An affordable offer supported by a 12-week cash flow. Numbers should match your bank statements and aged lists.
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Evidence the issue is temporary, plus actions you are taking. Explain the cause and what will change.
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Transparency. Provide full bank statements and aged lists so HMRC can check figures quickly.
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A named contact who will respond quickly and send updates. This helps HMRC move your case forward.
Tip: If you cannot meet current liabilities while paying arrears, HMRC will usually decline. To make sure that your offer is appropriate, contact Anderson Brookes for advice.
For a full view of the topic, read our ultimate guide to HMRC debt management.
What Is HMRC Time to Pay?
A Time to Pay arrangement is an agreement with HMRC that lets you settle tax debts in instalments. Instead of paying the full amount immediately, you agree a schedule, usually paid monthly, until the debt is cleared.
The arrangement can cover Self Assessment, PAYE, VAT, and Corporation Tax. It gives breathing space while ensuring HMRC still collects what is owed.
TTP is negotiated with HMRC, often by phone or through online services for smaller debts. Terms depend on your financial position and HMRC expects you to keep to the plan without missing payments. If you default, HMRC can cancel the arrangement and take enforcement action.
12-Week Cash Flow Plan: Example
A crucial part of a Time to Pay arrangement is showing HMRC that the repayments are affordable for you. One of the simplest ways to do this is by providing a short, weekly forecast. You don’t need complex software to do this. As long as you have a spreadsheet, you can create a 12-week cash flow plan to submit as evidence.
Step by Step
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Set up columns for Weeks 1 to 12.
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Add these rows: Opening cash, Receipts, Payments, Proposed TTP instalment, Closing cash.
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Split receipts by income stream. Apply your typical debtor days. For example, 35 days.
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Split payments into VAT, PAYE or NIC, Corporation Tax, suppliers, wages, overheads, and finance.
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Enter a first draft of the TTP instalment. Keep a small buffer so you are not running on empty.
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Check that closing cash stays positive each week.
Assumptions
Keep a box below the table that explains your numbers. Include debtor days, gross margin, payroll dates, VAT frequency and the next due date. Note any seasonal patterns or contracts that will start or end.
Sensitivity Checks
Test three quick cases and note the effect on weekly closing cash and the TTP instalment:
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Revenue down 10 percent
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Costs up 5 percent
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Debtor payments two weeks slower
Sizing the Offer
Average your weekly closing cash over Weeks 3 to 12. Subtract a small buffer. The result is a good guide to the maximum affordable weekly TTP. Convert to monthly if you prefer when you speak to HMRC. If you need more time than TTP, consider a Company Voluntary Arrangement (CVA).
Example Format
| Week | Opening cash | Receipts | Payments | TTP | Closing cash |
|---|---|---|---|---|---|
| 1 | £10,000 | £6,000 | £8,500 | £1,000 | £6,500 |
| 2 | £6,500 | £7,500 | £7,000 | £1,000 | £6,000 |
| … | … | … | … | … | … |
Evidence Pack Checklist
A clear pack speeds up decisions. Aim for one zipped folder with an index. PDFs are easier for HMRC to review.
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☐ Bank statements for the last 3 to 6 months, all accounts. These show actual cash movement.
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☐ Aged creditors and aged debtors reports, most recent. These show who you owe and who owes you.
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☐ Management accounts. Year to date profit and loss and a balance sheet.
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☐ 12 week cash flow with assumptions and sensitivities.
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☐ VAT. Last 4 returns and payment history.
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☐ PAYE or RTI. Latest submissions and schedules.
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☐ Corporation Tax. Latest CT600 calculation or statement.
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☐ Pipeline schedule. Signed contracts and renewal dates.
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☐ Finance or lease commitments and covenants.
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☐ Director drawings history for the last 12 months.
Be sure to name your files clearly: A1_Bank_Statements_Jan–Jun_2025.pdf, B1_Aged_Creditors_2025_07_10.pdf, C1_12_Week_Cashflow_v1_2.xlsx.
If you need a hand, we’re here to help. Send us your cash flow pack and we’ll provide advice.
For more guidance, read our guide on what to do when you can’t pay your tax bill.
Phone Script and Email Template
If you feel anxious about calling HMRC, that is normal. Use the short script below. Keep your documents open while you talk.
Phone Script
“Hello, my name is [Name], director of [Company] [UTR or VAT]. All returns are filed and we are keeping current taxes up to date. We have £[amount] arrears. Based on a 12 week cash flow, we can pay £[amount] per month for [term] months and meet ongoing liabilities. I can email our evidence pack now. What information do you need to proceed?”
Email Template
Subject: Time to Pay request – [Company] [UTR or VAT] – evidence attached
Hello,
We request a Time to Pay arrangement for £[amount]. Our 12 week cash flow supports £[instalment] per month for [term] months while remaining compliant with current taxes.
Attached: bank statements, aged creditor and debtor reports, management accounts, VAT and PAYE evidence, and a short pipeline schedule.
Named contact: [Name, phone, email].
Kind regards,
[Name], Director, [Company]
Common Refusal Reasons and How to Re-Engage
Sometimes HMRC will say no on the first try. Do not be discouraged. Fix the gap, update your pack, and try again.
| Reason | What to do |
|---|---|
| Missing returns or current taxes not up to date | File now and show proof, then resubmit with an updated offer. |
| Offer not affordable based on cash flow | Rebuild the 12 week forecast, right size the instalment, add a buffer. |
| Weak evidence or disorganised pack | Resubmit as one indexed PDF or zipped folder with the full checklist. |
| Repeated defaults in the past | Shorter term with a higher first payment, show governance changes. |
| No explanation of cause or seasonality | Add a one page cause and cure note with pipeline evidence. |
The table above gives you a simple template for re-engagement. Fixing the issue identified, attaching a revised pack and calling HMRC the same day go a long way to help.
Time to Pay or CVL? When to Pivot
Your duty is to act in the best interests of creditors when a company is insolvent. If a fair plan is not possible, it may be safer to consider Creditors’ Voluntary Liquidation. We will guide you through this with care and clear information.
If any of these conditions apply, you may want to consider a CVL:
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Negative closing cash under most likely and downside cases
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Arrears grow in the minus 10 percent revenue scenario
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Creditor pressure escalating or statutory demands issued
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Directors’ risk increasing, for example potential personal liability notices
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No route to solvency within 6 to 12 months
If you feel that your company is in this position, then Anderson Brookes’ licensed insolvency practitioners are here to help you. Read our guide to the company liquidation process or CVL timeline for more details, and contact us for personalised advice.
Maintaining Compliance During the Arrangement
Keep all current taxes and filings up to date while your Time to Pay runs. File VAT, PAYE or RTI, Corporation Tax and Self Assessment on time, even if older arrears are under the plan. Reconcile bank accounts weekly, keep a clear audit trail, and save proof of each instalment. Many directors find it helpful to ring fence VAT in a separate account and to set calendar reminders for both filing dates and TTP payments.
If cash looks tight, act early. Update your 12 week cash flow, identify the shortfall, and reduce non essential spending. Speak to key suppliers and lenders before a due date passes. If you believe a TTP instalment is at risk, contact HMRC before the payment date with an updated forecast and a revised, affordable schedule. HMRC is more likely to agree a short term adjustment if you are transparent and proactive.
Expect occasional information requests. HMRC may ask for recent bank statements, aged lists, or management accounts to confirm that the plan remains affordable. Reply within the deadline, label documents clearly, and keep responses factual. If your position improves, consider paying slightly more to reduce interest and finish the plan sooner.
Thinking about striking off instead? Visit our page on closing a limited company with HMRC debts.
Appendix: Further Guidance
Eligibility Criteria (What HMRC Assesses)
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Genuine short term financial difficulty, not avoidance of payment
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A viable, affordable plan supported by a 12 week cash flow
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Good compliance history or clear plan to correct lapses
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Full transparency, complete and accurate information
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Early contact before enforcement begins
Why Businesses Apply (Typical Triggers)
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Seasonal dips, late customer payments, temporary loss of contracts
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PAYE, VAT, or Corporation Tax arrears building despite viable trading
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One off shocks, for example repairs or supply chain disruption
Responding to HMRC Requests for Information
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Reply within the deadline or ask for an extension in advance
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Send only the documents that evidence the numbers in your cash flow
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Label files clearly and cross reference to your summary
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If you cannot provide an item, explain why and suggest an alternative
Clarifying Unusual Transactions
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Flag one off payments, director loans, related party transfers, or sudden income drops
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Provide a short note plus evidence (invoice, contract, email trail)
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State if the item will recur or was exceptional
Frequently Asked Questions
You need to show HMRC that your proposal is realistic, supported by accurate records, and affordable. Evidence of cash flow, a clear repayment plan, and awareness of the consequences of missed payments are all essential.
What documentation is required to substantiate cash flow for a Time to Pay arrangement with HMRC?
You may be asked to provide recent bank statements, profit and loss reports, and cash flow forecasts. HMRC often requires evidence of income, outgoings, and liabilities to assess affordability. In some cases, supporting documents such as aged debtor and creditor listings may also be requested.
How can I structure a Time to Pay arrangement to avoid penalties?
You should propose a schedule that demonstrates affordability without being overly optimistic. Payments must be regular, made on time, and based on realistic cash flow projections. HMRC is more likely to accept an arrangement if you can show that repayments will not be missed.
What are the consequences of not adhering to a Time to Pay agreement?
If you miss payments or fail to keep to the agreed terms, HMRC can cancel the arrangement. This may lead to enforcement action, such as debt collection or legal proceedings. Penalties and additional interest may also be applied.
Is it possible to split a tax payment into instalments without incurring interest?
HMRC charges interest on late payments, even when a Time to Pay arrangement is in place. While instalments are allowed, interest will continue to accrue until the debt is cleared. The arrangement prevents penalties for late payment but does not remove interest charges.
What steps should be taken if one is unable to pay their tax bill by the due date?
You should contact HMRC as soon as possible, ideally before the payment deadline. Provide accurate details of your financial position and propose a plan you can maintain. Early communication increases the likelihood of reaching an agreement and avoiding penalties.
How is interest calculated on a tax payment plan with HMRC?
Interest is charged daily on the outstanding balance from the date the tax became due. The rate is set by HMRC and can change in line with Bank of England base rate movements. You can use HMRC’s online tools to estimate the total cost of the arrangement.
Get Help Today
If you’re struggling with HMRC debts, you’re not alone. The team at Anderson Brookes has helped thousands of directors across the UK and is experienced in working with small and medium businesses facing financial difficulties.
Send us your 12-week cash flow and supporting documents and we will check the numbers, confirm affordability, and tell you exactly what to add, remove, or rename so your pack is simple for HMRC to review.
