Receiving a VAT bill you can’t pay in full can be worrying. The good news is that, in some cases, HM Revenue & Customs (HMRC) may allow you to spread the cost through a Time to Pay arrangement.
Time to Pay isn’t available automatically, and not every business will qualify. However, if you’re experiencing temporary cash flow difficulties, it’s one of the first options worth exploring before your payment becomes overdue.
In this guide, we’ll explain what HMRC Time to Pay is, how the process works, what information you’ll need, and how to give yourself the best chance of reaching an agreement.
Need an overview of the options when faced with a VAT bill? Read this: Can’t Pay Your VAT Bill? 5 Options for UK Businesses in 2026
What is HMRC Time to Pay?
Time to Pay is an arrangement that allows eligible taxpayers to pay certain tax liabilities over an agreed period rather than in a single payment.
For businesses with a VAT bill they cannot pay immediately, a Time to Pay arrangement may allow repayments to be spread into more affordable instalments. The purpose is to help businesses experiencing temporary financial difficulties while ensuring the tax owed is still paid.
It’s important to remember that this is not a right or an entitlement. HMRC considers applications individually and decides whether a payment arrangement is appropriate based on the information provided.
A simpler online process since 2023
Until relatively recently, businesses generally needed to contact HMRC directly to discuss a Time to Pay arrangement.
In May 2023, HMRC introduced an online self-service option for some eligible VAT-registered businesses, allowing them to set up a payment plan without speaking to an adviser. This has made the process quicker and more convenient for many straightforward cases, although not every business or VAT debt will qualify for the online route.
If you aren’t eligible to apply online, or if your circumstances are more complex, you’ll usually need to contact HMRC directly to discuss your options.
You can check if you’re eligible for a payment plan on the HMRC website or you can contact them directly to discuss payment problems.
When should you apply?
One of the biggest mistakes businesses make is waiting until the problem has become urgent. It’s human nature, but something to fight against. Many profitable businesses have cash flow issues, and the Capify Business Confidence Report found that just 3% of SMEs said their cash flow position was “very healthy”.
If you know you’re unlikely to pay your VAT bill on time, it’s generally advisable to contact HMRC or explore the online service as early as possible. Acting before the payment deadline demonstrates that you’re taking the issue seriously and gives you more time to consider your options.
Waiting until interest has started to accrue or enforcement action has begun can reduce your flexibility and increase the overall cost of resolving the issue.
How does the application process work?
The exact process depends on whether you’re eligible for HMRC’s online self-service option or whether you’ll need to speak with HMRC directly.
In general, the process involves:
- reviewing whether you’re eligible for a payment plan
- providing details about your outstanding VAT liability
- explaining your financial circumstances if required
- proposing a repayment plan that you can realistically afford
- agreeing to the arrangement if HMRC accepts your application.
If you’re applying through the online service, HMRC will guide you through the relevant steps. If your circumstances require a manual review, you should be prepared to discuss your business finances and explain why you’re unable to pay immediately.
What information should you have ready?
Preparation can make the process much smoother, so it really pays to do your homework and have all the relevant information to hand.
Although requirements vary depending on your circumstances, expect to need:
- your VAT registration details
- details of the amount you owe
- information about your business income and expenditure
- an overview of your current cash flow
- details of any other outstanding tax liabilities
- an idea of what monthly repayments your business could realistically afford.
HMRC wants to understand whether your cash flow problem is temporary and whether the proposed repayment plan is sustainable. Being open, realistic and accurate is usually more helpful than making repayment promises that may prove difficult to keep.
What does HMRC consider?
Every application is assessed on its own merits. While HMRC doesn’t publish a simple checklist that guarantees approval, it will generally want to understand your financial position, whether you’ve kept your tax affairs up to date, and whether the repayment proposal is affordable and realistic.
Businesses experiencing a short-term cash flow issue are often in a stronger position than those facing more fundamental financial difficulties.
Check out this guide to see how you may be able to improve your cash flow before speaking to HMRC: How to Pay a Large VAT Bill Without Damaging Your Cash Flow
Will you still pay interest?
Potentially, yes. A Time to Pay arrangement allows payment to be spread over time, but it does not necessarily remove any interest that may apply. HMRC charges late payment interest on overdue VAT, and the rules around interest and penalties can change over time.
Before entering into any payment arrangement, it’s worth understanding the total cost involved so you can compare it with any alternative options that may be available.
Is Time to Pay always the best option?
Not necessarily. For some businesses, spreading payments through HMRC will be the most appropriate solution.
For others, using existing cash reserves, improving short-term cash flow or arranging business finance may provide greater flexibility while preserving supplier relationships and day-to-day working capital.
Every business is different. The right answer depends on your cash flow, future income, borrowing costs and wider financial plans.
That’s why it’s important to consider all the available options before making a decision.
Practical tips before you apply
If you’re considering a Time to Pay arrangement, these steps may help:
- Don’t ignore your VAT bill.
- Submit any required VAT returns on time, even if you can’t pay immediately.
- Review your latest cash flow forecast.
- Work out what repayments your business could genuinely afford.
- Gather the financial information you’ll need.
- Seek professional advice if you’re unsure about the best course of action.
Taking time to prepare can make conversations with HMRC more straightforward and help you understand which solution is likely to be most suitable.
Frequently asked questions
Can every business apply for Time to Pay?
Businesses can ask HMRC to consider a Time to Pay arrangement, but approval depends on individual circumstances and not every business will qualify.
Can I apply online?
Since May 2023, some eligible VAT-registered businesses have been able to set up a payment plan using HMRC’s online self-service option. If you’re not eligible, you’ll usually need to contact HMRC directly. As eligibility criteria may change, always check the latest tax guidance on GOV.UK.
Should I wait until I’ve missed the payment deadline?
Generally, no. If you know you’ll struggle to pay, it’s usually better to act as early as possible.
Can my accountant help?
Yes. Many businesses ask their accountant or tax adviser to help them understand their options, prepare financial information and decide whether a Time to Pay arrangement is the most appropriate solution.
Consider your options
A Time to Pay arrangement can provide valuable breathing space for businesses experiencing temporary cash flow difficulties, but it’s only one of several ways to manage a VAT bill.
Capify offers fast, flexible finance to help with cash flow and investment. Find out what you could borrow with our quick eligibility checker.
Important: This article is intended as general guidance only and does not constitute tax, legal or financial advice. HMRC policies, eligibility criteria, application processes, interest charges and penalties may change over time. Before making any decision, always check the latest guidance published by HMRC on GOV.UK or speak to HMRC directly. You should also consider seeking advice from a qualified accountant or professional tax adviser who understands your individual circumstances.
