Time to Pay: information to prepare

A Time to Pay discussion needs an accurate tax balance and a realistic account of income, expenses, assets and other commitments. Contact HMRC through its official route and prepare a proposal the taxpayer can sustain rather than promising instalments without a cash-flow review.

Keep filing obligations separate and identify upcoming liabilities as well as the existing debt. An arrangement is subject to HMRC agreement and its actual terms.

Establish the debt and the payment difficulty

Prepare a schedule of the tax owed, periods, references, due dates and any amounts already paid. Check it against current HMRC statements before proposing instalments. Separate a disagreement about the amount from an inability to pay an accepted liability. A payment arrangement addresses how a debt is paid; it does not itself decide an appeal or correct an inaccurate return.

HMRC may agree a payment plan where the taxpayer cannot pay in full, but it assesses affordability and does not guarantee acceptance. ^[1] Explain the cause of the difficulty, whether temporary or continuing, and what has changed since the bill arose. A factual account supported by figures is more useful than a promise that business will improve without evidence of likely receipts or available funds.

Prepare a realistic income and spending picture

Collect recent income, expenditure, bank balances and other relevant financial commitments. For a business, prepare a cash-flow forecast showing expected receipts and necessary outgoings over the proposed repayment period. Distinguish confirmed income from hoped-for sales or disputed customer debts. The proposed instalment should be assessed against cash actually likely to be available, not simply accounting profit shown in annual accounts.

HMRC's payment-plan guidance asks for income and spending information, other tax liabilities, savings and investments, and the relevant tax reference and bank details. ^[2] Keep personal and company information separate according to who owes the debt. If household or director funds are relevant to the discussion, explain their status accurately rather than assuming money can be transferred or committed without the necessary authority and advice.

Include future taxes and other commitments

Add upcoming tax payments to the forecast so the proposed plan does not appear affordable only because future liabilities have been omitted. Identify payroll, rent, essential operating costs and existing borrowing commitments. Explain seasonal fluctuations and the timing of larger receipts. A plan based on an average month may be unsuitable where a business earns most of its income during a short season.

List savings or assets and any practical restrictions on access, with supporting information. HMRC's guidance explains that available resources may be considered when assessing the proposal. ^[2] If broader financial distress is involved, obtain appropriate debt or insolvency advice rather than using a tax instalment request to postpone addressing an unsustainable position. Record the assumptions and advice relevant to the repayment proposal.

Use the appropriate arrangement process

Check current eligibility for setting up a plan online, and contact HMRC through the relevant official route if that option is unavailable. Prepare the information before the call or application so the proposal can be explained consistently. Keep the requested instalment, proposed start date and any initial payment in a written schedule. Do not treat an automated eligibility check or an unanswered message as an agreed arrangement.

HMRC distinguishes an overdue-tax payment plan from a Budget Payment Plan towards a future Self Assessment bill. ^[2] Identify which problem you are solving before choosing a service. HMRC debt letters and payment records explains how to reconcile debt letters and payment records, which can help ensure that the proposed arrangement covers the correct liability and does not omit another balance already being pursued.

Record the agreed terms and monitor performance

If an arrangement is agreed, retain the confirmation, payment schedule and reference details. Check which taxes and periods it covers, how interest is dealt with and what to do if circumstances change. HMRC's guidance explains that interest can continue on tax paid late. ^[3] Do not describe the plan as cancelling interest or removing the debt unless the actual written terms support that conclusion.

For assistance preparing the financial information and proposal, see Tax payment arrangement support. Explain the tax types, outstanding balance and timing of the difficulty so the scope can be assessed. Confirm separately who will speak to HMRC and who has authority to arrange payments. Keep evidence of each instalment and reconcile it to the account rather than assuming a direct debit has succeeded simply because it was scheduled.

If the forecast changes and an instalment may be missed, raise the issue promptly through the appropriate contact. Keep the revised figures and any new agreement together with the original plan. Review the position regularly, including new liabilities, so a short-term arrangement remains connected to the actual financial situation instead of continuing on assumptions that are no longer realistic.

Illustrative scenario

A business with overdue tax prepares a cash forecast including wages and the next VAT payment. It uses that evidence to discuss an affordable arrangement and records the agreed dates.

Preparation checklist

• Confirm the outstanding balance
• Prepare income and expenditure
• Include upcoming tax
• Retain agreed payment terms