Definition
A Time to Pay arrangement is a payment plan agreed with HM Revenue and Customs (HMRC) that lets a business or individual pay an overdue tax bill, such as Corporation Tax, VAT or Self Assessment, in monthly instalments. HMRC only agrees a plan it considers affordable. Interest still runs on the unpaid balance, but for VAT an agreed plan can mean lower or no late payment penalties.
Setting one up
Some plans can be set up online; otherwise you contact HMRC. You will need:
- the reference number for the tax, such as the Unique Taxpayer Reference
- UK bank details for a Direct Debit
- details of income and spending (the company’s, if the debt is company tax)
What HMRC expects from a company
HMRC expects a company to reduce the debt as far as possible first, for example by selling stock or vehicles, and may ask directors to put in personal funds. There is no fixed time limit on a plan. If a payment is missed, HMRC will try to renegotiate; if you do not engage, it can use debt collectors or, for business taxes, close the company down.
For VAT, a plan can cover penalties and late payment interest as well as the tax. If the company can pay in full, SmartFiling’s guide on how to pay Corporation Tax covers the payment methods.
Related questions
- What can I do if my company can't pay its Corporation Tax bill? Contact HMRC as early as possible, ideally before the due date, and ask for a Time to Pay arrangement.
- Does interest stop during a Time to Pay arrangement? No, interest is charged on the outstanding balance until the tax is paid in full.
Related terms
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Late payment interest
Late payment interest is the interest HM Revenue and Customs (HMRC) charges when tax is paid after its due date, including Corporation Tax, VAT and Self Assessment.
Read definition -
Corporation Tax
Corporation Tax is the tax UK limited companies pay to HM Revenue and Customs (HMRC) on their taxable profits.
Read definition -
Self Assessment
Self Assessment is the system HM Revenue and Customs (HMRC) uses to collect Income Tax that is not taken automatically, for example through PAYE.
Read definition
