For company directors, facing a tax demand you cannot immediately pay is one of the most stressful challenges you could encounter. Especially knowing HMRC will act decisively when dealing with non-payment, often moving quickly to either levy distraint or present a winding-up petition.

However, if the business is fundamentally viable but facing a temporary cash flow setback, there is a potential lifeline available: a Time To Pay (TTP) arrangement. 

A TTP being a formal agreement with HMRC that allows repayments on tax arrears for VAT, PAYE or Corporation Tax to be repaid over a more manageable period, typically between three to twelve months.

Let’s explore four main advantages that securing a TTP agreement will give your business:

  • Halting legal and enforcement action

The most immediate and critical benefit of a TTP is that it stops HMRC (and other creditors) from pursuing legal action against your company. Without an agreement, HMRC can issue winding-up petitions against the company or even begin to use Direct Recovery of Debts (DRD) which gives them the power to seize funds directly from your bank accounts.

Securing a TTP will pause these threats as long as the agreed payment schedule is adhered to, allowing directors to focus on trading their way out of current difficulty rather than preparing for legal battles.

  • Improved cash flow management

The breathing space provided by a TTP means that by spreading the tax liability over a longer period, you avoid the crippling impact of a lump-sum payment that in all likelihood, you can’t currently afford. 

By restructuring the repayment, it allows you to free up cash for other essential business expenses such as wages and supplier payments; service other debts and plan finances more effectively and be able to better navigate seasonal fluctuations or unexpected expenses.

  • Avoidance of late payment penalties

One advantage of proactively negotiating a TTP before tax payments are due is that you can often avoid the surcharges that HMRC usually levies for late payments. 

While you still have to pay interest on the outstanding arrears, sticking to a TTP agreement prevents the addition of any further financial penalties. This could prove to be a significant saving, ensuring funds will go towards reducing the principal debt rather than paying fines.

  • Privacy and business continuity

Unlike formal insolvency proceedings such as liquidations or winding-up petitions, a TTP is a private arrangement between the company and HMRC and isn’t advertised publicly.

Obtaining a TTP isn’t a right – an insolvency practitioner can help

The many advantages of a TTP are clear but remember that obtaining one isn’t automatic. 

It’s a negotiation and to be successful you have to demonstrate to TTP that the company is viable, that the cash flow issue is temporary and that you can be trusted to stick to the agreed repayment plan.

Strict compliance is required at all times. Any default on a TTP payment could see HMRC cancel the arrangement immediately and resume enforcement action, other without needing additional permission from the High Court.

HMRC are going to increase their enforcement activity in the new year including increasing their use of Direct Recovery of Debts (DRD). 

If you think you could benefit from a Time To Pay arrangement then get in touch with us for a free initial chat. 

We can help advise you on the possibility, help put together the best case to persuade the HMRC and explore other potential options depending on the financial circumstances of your business and your goals for 2026 and beyond.