HMRC Time to Pay for a Limited Company
How HMRC payment plans work, what to prepare and what to consider if the company cannot afford one.
Published by Hedwyn Ltd. General information for directors of companies registered in England and Wales.
Does this sound familiar?
VAT, PAYE, Corporation Tax or another company tax is overdue. You believe the business could recover if HMRC allowed monthly payments, but you are unsure what HMRC will ask or whether the company can afford the arrangement.
The short answer
HMRC may agree a payment plan, commonly called Time to Pay, where the proposal is realistic and affordable. It is not automatic. HMRC may ask how quickly the company can pay, what funds or assets are available and why the debt arose.
An arrangement only helps if the company can meet both the agreed instalments and new tax liabilities as they arise.
What this could mean for the company
A workable plan can give a viable company time to clear arrears. An unaffordable plan can delay the problem and create another default. Before making a proposal, directors need a current cash-flow view that includes ordinary trading costs, payroll, new tax and other creditors.
What it could mean for you personally
A limited company's tax debt does not automatically become the director's personal debt. Personal exposure can nevertheless arise in specific circumstances, including guarantees, certain statutory notices or misconduct. Obtain tailored advice rather than assuming either that you are protected in every case or that you are automatically liable.
What may be urgent
- Bring outstanding returns and figures up to date
- Record every HMRC deadline and reference
- Prepare a realistic proposal before contacting HMRC
- Review whether the company can meet new liabilities as well as arrears
- Treat enforcement or a winding-up petition as a separate urgent escalation
What to avoid
- Promising an instalment the cash flow cannot support
- Ignoring current returns because older tax is unpaid
- Using optimistic sales forecasts without a downside case
- Assuming a request or discussion pauses legal action
Information to gather
- Tax types, periods and balances owed
- Filed and outstanding returns
- Current bank position and assets that may release funds
- A short-term cash-flow forecast
- Other arrears and creditor commitments
- A proposed payment amount and explanation of how it will be funded
Options that may be considered
The company may propose a payment plan, seek informal agreements with other creditors, obtain new funding where sustainable, pursue restructuring, or consider a formal insolvency route. If a plan is refused or cannot be maintained, reassess the whole position promptly.
What happens next?
Start with I cannot pay HMRC, compare the wider HMRC debt options, or complete the confidential assessment.
Authoritative sources
- HMRC: if you cannot pay your tax bill on time
- HMRC: setting up a payment plan
- Insolvency Service: options when a company is insolvent
This guide provides general information for directors of companies registered in England and Wales. It is not legal, financial, accounting or insolvency advice.
This guide is general information, not legal, financial, accounting or insolvency advice. See how our content is prepared.