Time to Pay (TTP) has become increasingly important as UK businesses grapple with high costs, uneven demand and tight financing conditions, prompting organisations to find new ways to manage their finances and, in particular, their tax liabilities. The day-to-day costs and pressures of running a business may take up the immediate priorities for many business owners, but the tax obligations must not be forgotten. That is where the HMRC Time to Pay facility can come into play.
What is Time to Pay and how does it work?
Time to Pay is a long-established but often misunderstood part of the tax system. It typically comes into focus only when something has already gone wrong. In the current economic climate, that moment is sadly arriving more frequently for otherwise viable businesses.
At its simplest, TTP allows businesses that cannot settle a tax bill on the due date to agree an instalment plan with HMRC. The arrangement most commonly applies to VAT, PAYE and Corporation Tax, although each application is assessed on its individual circumstances.
The scheme, originally established in 2008, provides a structured mechanism that reflects a basic economic reality: cash-flow problems can be temporary, while tax liabilities are permanent. TTP is intended to help companies continue to trade and to better manage their tax obligations.
However, TTP should not be seen as an overdraft – merely the opportunity to add some flexibility. The expectation remains that tax is paid in full and on time. Indeed, when used correctly, TTP can help businesses remain solvent, protect jobs and should help to avoid the domino effect of insolvencies that can turn a short-term downturn into a terminal crisis.
Typically, repayment plans to HMRC extend to 12 months and will depend on the individual firms specific financial capabilities and commitments. There are no set periods for repayment, with some lasting up to 5 years.
The rationale from the HMRC is pragmatic. HMRC would rather recover tax over a sensible period than force a business into insolvency and recover only a fraction of what is owed.
How to approach Time to Pay
However, for TTP to be effective it needs to be approached in a timely manner – at the earliest opportunity. When used inappropriately, it has the potential to add significant cost, stress and an administrative burden to an already difficult situation.
For example, from our experience at PKF Littlejohn Advisory, we’ve seen many businesses turn to HMRC when it may be already too late, after the business has missed payment deadlines, ignored correspondence and allowed interest and penalties to accumulate. By then, trust has eroded, options are limited and the overall liability has increased.
Some firms have also sought to use TTP as a substitute for addressing deeper issues. Where margins are structurally weak, customers habitually pay late or costs are out of control, spreading tax debt over several months may simply postpone an inevitable reckoning.
The third pitfall many firms fall into is underestimating the costs involved in repayments. Even where penalties are reduced, interest continues to accrue and organisations must factor this into their decision making.
Meeting HMRC’s expectations for Time to Pay
While the TTP process is relatively straightforward, it rewards preparation and realism. When assessing claims, HMRC typically looks for three key elements.
Firstly, HMRC will look for evidence that the financial difficulty is genuine and temporary. One-off cash pressures such as delayed customer payments, the loss of a contract or a short-term spike in costs are generally seen as credible. Vague explanations without specifics, or repeat requests for leniency are not.
Secondly, the business must provide a realistic and affordable repayment plan. Organisations must demonstrate that planned financial instalments can be delivered upon. Businesses should also expect to demonstrate that tax payments are being prioritised over discretionary spending and to explain what steps are being taken to improve cash flow. HMRC are likely to take a dim view of schedules that collapse after a few months.
Thirdly, the organisation must commit to improved processes in an effort to ensure future compliance. Filing returns on time and keeping up with current liabilities significantly increases the likelihood of HMRC agreeing to a TTP arrangement.
Economic pressures increasing the need for Time to Pay
The wider economic context has made Time to Pay increasingly relevant. Inflation has increased working capital requirements, while higher interest rates have pushed up the cost of short-term borrowing. For many businesses, seeking structured breathing space is a rational response rather than a sign of failure.
In macroeconomic terms, the benefits of TTP are shared. The Exchequer ultimately collects its revenue, companies remain trading, employees stay in work and suppliers continue to be paid.
The message to businesses is clear: if a payment issue is foreseeable, act early, gather accurate financial information and seek professional advice. Fixing the problem, rather than assigning blame, may be the difference between recovery and collapse.
Why businesses choose PKF Littlejohn Advisory for Time to Pay support
At PKF Littlejohn Advisory, since the launch of our Tax Arrears Solutions service in late 2025, we have helped businesses with a combined indebtedness to HMRC of more £16.8m and accounting for around 1,500 jobs. It is clear that there is a need for TTP, and a willingness for businesses to comply. It is just a case of helping businesses make the right decision, at the right time so that they can continue operations.
For further guidance on any issues raised in this article, please contact Mike Lee.
