HMRC tax debt: more time to pay, but rising enforcement

HMRC may agree a Time to Pay (TTP) arrangement when a company is unable to pay tax owed on time but can do so over a longer period.

FRP Advisory recently submitted a freedom of information request to HMRC. We requested information on TTPs, Notice of Requirement to provide a security deposit (NORs) and winding-up petitions for the last five years.

Time to Pay use grows

There has been a significant increase in companies using TTP arrangements for VAT, PAYE and corporation tax. Over the five-year period there has been a 174% increase in use of TTP for VAT, a 53% increase for PAYE and a 57% increase for corporation tax.

Why have we seen such an increase in use of TTPs? Partly because the TTP initiative is now more established and it is a good way for companies to better manage their cash flow, but it’s also because HMRC is more willing to accommodate these requests as these arrangements facilitate the collection of outstanding tax and offer a better alternative to formal insolvency.

HMRC’s current stance is that it is willing to agree a TTP for a period of no more than 24 months. In 2025–26, the average duration of TTP arrangements was 15 months for VAT, 16 months for PAYE and 18 months for corporation tax. Over the last five years the average duration of TTP arrangements for each tax owed has increased by an average of two months. So not only are more companies using TTP arrangements, but the length of time required and allowed to pay the tax owed has increased.

The good news is that over 90% of TTPs are completed successfully and this rate has stayed consistent over the above timeframe. The bad news is that, with more companies using TTPs, the actual number of failed TTPs has increased from 32,049 to 62,014, an increase of nearly 94% over the last five years.

This may partly explain why HMRC is issuing more NORs and winding-up petitions.

HMRC security demands rise

A Notice of Requirement (NOR) is a formal legal demand issued by HMRC requiring a business or its directors to pay an upfront financial security deposit to cover future tax liabilities such as VAT, PAYE or National Insurance. It is issued when HMRC believes there is a high risk of non-payment, typically due to a history of arrears or late payment.

The numbers of NORs issued over the five financial years are as follows:

HMRC have confirmed the number of NORs issued is now sitting at pre-COVID-19 levels. The table above shows there has been an increase of approximately 264% in the number of NORs in the last five years, and in the last 12 months alone there was an increase of 1,511 or 40.2% in NORs issued. That’s a significant increase and suggests that HMRC are having to increase their recovery action as more companies are struggling to pay tax owed.

The increased use of NORs by HMRC will inevitably force a director to address the company’s tax and wider financial position. This may lead to the closure of a company. However, any new company formed by the same directors will still be vulnerable to receiving a NOR due to the non-payment of tax by the old company.    

Winding-up petitions issued by HMRC:

The table above shows winding-up petitions issued by HMRC and winding-up orders granted by the courts over the last six calendar years (between 2020 and 2025).

Information held for 2021 is exempt from disclosure under s44(1)(a) of the Freedom of Information Act. The government introduced a moratorium on insolvency action against companies during the COVID-19 pandemic. HMRC complied with this and voluntarily extended this to individuals. Therefore, for a period of around two years HMRC did not take any insolvency action. This moratorium was fully lifted from April 2022.

HMRC have confirmed they will only apply to courts to make a customer insolvent as a final course of action, after they have considered all other ways to recover a debt. Furthermore, HMRC advised that pursuing insolvency action usually only occurs when one or more of the following are met:

• HMRC believe a customer’s outstanding debt will not be recovered and they will not be able to pay future debts.
• A customer who can pay what they owe has gone out of their way to avoid paying.
• HMRC suspect a customer is not being honest about the assets they hold and the debt could be paid more quickly.

From 2024 to 2025, the number of winding-up petitions issued by HMRC increased by 1,136 or 31.3% and the number of winding-up orders granted increased by 511 or 27.1%. That’s a significant annual increase which reflects a trend that is likely to continue as more companies struggle to pay tax owed.

Tax pressures demand early action

More companies are obtaining TTP arrangements to pay their tax. This is partly because the TTP initiative is now more established and it is a good way for companies to better manage their cash flow.

However, the clear picture is that more companies are struggling to pay tax owed:

• The number of failed TTPs has increased from 32,049 to 62,014, an almost 94% increase over the last 5 years;
• The number of NORs issued by HMRC in the last 12 months has increased by 1,511 or 40.2%; and
• The number of winding-up petitions issued by HMRC in 2025 increased by 1,136 or 31.3% while winding-up orders granted increased by 511, or 27.1%.

Given the above, it is reasonable to assume we will see an increase in the number of companies becoming insolvent. Any director of a company which is struggling to pay its debts, including tax owed, should seek early advice. The Insolvency Service is tightening its enforcement action against such directors. Where the relevant legal conditions are met, directors may face compensation orders as well as disqualification.