Can you pay HMRC in instalments?

How do I get more time to pay my company’s tax bill?

Outstanding tax liabilities are one of the most common types of business debt. Whether it’s VAT, PAYE, National Insurance, Self-Assessment or Corporation Tax, if you’re experiencing cash flow difficulties or a seasonal dip, it can be stressful and challenging to get back on track. 

Fortunately, there is a potential solution. Rather than clearing your tax bill in full, you can usually arrange to pay HMRC in instalments. Most businesses can set up an HMRC ‘Time to Pay’ Arrangement, which allows you to clear your tax liability through affordable monthly payments.

Here we explain what a Time to Pay Arrangement is, how you can set one up, who qualifies and the alternatives if HMRC refuses your proposal.  

How can I pay HMRC in instalments? 

If your company has a tax bill it cannot pay, you can contact HMRC through your online tax account or by phone to set up a Time to Pay (TTP) Arrangement. You should do this as soon as possible to avoid late payment penalties and enforcement action.

Better still, don’t wait until the bill is overdue. If you can see cash flow issues coming and know you’re going to struggle to pay an upcoming bill, contact HMRC in advance. Being proactive shows a willingness to pay and can improve your chances of making a payment plan. 

Generally speaking, you can use the HMRC online service to set up a TTP Arrangement for tax debts of up to £50,000 for VAT or £30,000 for Self Assessment. For larger amounts, or if your circumstances are more complex, you may need to call HMRC’s Business Payment Support Service.  

Setting up a Time to Pay Arrangement

Online

You will usually be able to set up a Time to Pay Arrangement online if you:

• Have filed all your tax returns
• Don’t have an existing HMRC payment plan
• Have no other outstanding tax debts
• Can repay the debt within 12 months

The online process is relatively straightforward. Before you start, create a clear budget so you know how much you can realistically afford to pay each month. When calculating this figure, bear in mind that you will also need to settle your ongoing tax bills when they’re due. 

You will need to tell HMRC:

• How much you owe
• Why you cannot pay the bill in full
• What efforts you have made to pay the debt
• How much you can afford to pay each month 
• Your bank details so it can set up Direct Debit payments

HMRC will assess the information to determine whether your proposed repayment plan is affordable and sustainable. In some cases, it may request additional information or contact you to discuss your circumstances in more detail. 

Over the phone

If you need to contact HMRC by phone, you should expect a detailed discussion of your finances. The adviser will work through your income, expenditure and existing debts in detail to understand exactly what you can afford, so it’s important to have clear, accurate figures to hand. 

They will also want to know whether your cash flow issues are short-term or part of a longer-term problem.

Online, you submit your proposal and wait for a decision. Over the phone, it’s more of a live negotiation. You can respond to questions in real time, sense where there’s flexibility and adjust your proposal accordingly. That might mean reshaping your monthly payments or securing a longer repayment period than you initially expected. 

HMRC can then accept your payment plan during the call, or send confirmation at a later date once it has reviewed your information.  

How long do HMRC instalment plans last?

Time to Pay Arrangements typically last anywhere from three to 12 months. That said, if you’re dealing with a large tax bill or are facing longer-term financial pressure, HMRC may agree to extend the repayment period beyond that. The key is to demonstrate that you’re making a genuine effort to repay what you owe and that your proposal is realistic based on your circumstances. 

There may also be some flexibility around your plan. If your financial circumstances change, for better or worse, HMRC will usually be willing to adjust your monthly payments or your repayment period to reflect them. However, you should always contact HMRC before you’ve missed a payment. 

It’s also important to note that while a Time to Pay Arrangement will halt late payment penalties, it doesn’t stop the clock entirely. Interest will continue to accrue on the outstanding balance for the full duration of the plan. In practical terms, that means the longer you take to clear the debt, the higher the total cost will be.  

Can my business pay HMRC in instalments? 

Not every business can pay HMRC in instalments. If your company is financially viable and has a good tax compliance history, you should be able to make a payment plan. However, if your company is at risk of insolvency, has other outstanding tax liabilities or has relied on Time to Pay Arrangements in the past, your chances may be reduced.

When assessing a Time to Pay request, HMRC will typically expect to see that:

• You have filed all your tax returns and do not have any other tax debts
• You do not have other existing Time to Pay arrangements in place
• The business is viable and able to meet its future tax obligations
• The business has a short-term cash flow problem rather than a long-term inability to pay 
• You have made reasonable efforts to pay the tax bill before requesting a payment plan
• You can afford the proposed monthly repayments while also staying on top of ongoing tax liabilities
• Your previous compliance history with HMRC is generally good

Even if you do not meet every one of these criteria, HMRC may still accept your TTP proposal if you can demonstrate that you are committed to paying what you owe and your proposal is realistic.

What happens if HMRC cancels my instalment plan? 

Once you make a plan to pay HMRC in instalments, you need to stick to it. That’s why it’s so important to make sure that the monthly instalment amount is manageable, even if that means it takes a couple more months to clear the debt. 

If you cannot make a monthly payment, you should contact HMRC immediately to discuss your situation. It may offer to change the terms of the arrangement, although there are also circumstances when it may decide to cancel the deal, for example, if you:

• Make multiple late payments or miss an instalment entirely
• Fail to pay your ongoing tax bills when they are due
• Fail to file tax returns when they’re due
• Take on new debt that affects your ability to make the payments without informing HMRC
• Experience an upturn in your financial position and can pay what you owe in full
• Enter a formal insolvency procedure which changes how the debt is managed 

If HMRC cancels an instalment plan, it will usually resume normal debt recovery measures, which can include applying penalties, using enforcement action and potentially issuing a Winding Up Petition.  

What happens if HMRC refuses my proposal to pay in instalments? 

If HMRC refuses your Time to Pay proposal, you should contact our team at your earliest opportunity. Our licensed Insolvency Practitioners have extensive experience in negotiating directly with HMRC and know how to present your case to get the best possible outcome. 

If a Time to Pay Arrangement is still not possible, we can advise on the best route forward depending on your company’s circumstances. That could be: 

• Alternative finance - Funding options such as asset-based lending and invoice finance can provide a short-term cash injection. That may enable you to clear the debt in full and avoid enforcement action.
• Company Voluntary Arrangement (CVA) - A Company Voluntary Arrangement (CVA) is a legally binding repayment agreement with all your unsecured creditors, not just HMRC. It allows you to repay your debts while you continue to trade, and a proportion of the company’s debt may be written off.
• Administration - If you are under serious pressure from HMRC and other creditors, Administration can protect the business from legal action while an Insolvency Practitioner explores its sale or restructure.
• Creditors’ Voluntary Liquidation (CVL) - If the company is insolvent and has no real prospect of making a recovery, a Creditors’ Voluntary Liquidation allows you to close it in an orderly way. A liquidator will sell the company’s assets to repay the creditors as far as possible, and any remaining debts will usually be written off when the company is closed. 

Are you struggling to pay a business tax bill?

If your company can’t pay a tax bill in full or you’re facing increasing pressure from HMRC or other creditors, we can provide expert support before the situation escalates. Our team of licensed Insolvency Practitioners can help you understand your options, negotiate a realistic repayment plan and put steps in place to stabilise your business.

Get in touch for a free consultation or arrange a face-to-face meeting at one of our 100+ offices throughout the UK.