Time to Pay: when HMRC’s support comes with sharper edges

Time to Pay (TTP) arrangements have long been seen as offering breathing space for businesses under short‑term cash pressure, allowing tax liabilities to be managed over time while trading continues. But recent experience suggests that HMRC’s approach is hardening and directors should be alert to the potential consequences.

Over the past month, we have seen multiple instances where HMRC has gone beyond discussing payment terms with the company and has instead raised the prospect of directors becoming personally exposed to unpaid tax liabilities. In some cases, this has arisen during TTP discussions, rather than at the point of insolvency.

HMRC has well‑established powers to pursue directors personally for unpaid PAYE, NIC and, in certain circumstances, VAT. These include Personal Liability Notices and Joint and Several Liability Notices, where HMRC believes non‑payment is linked to fraud, neglect or repeated non‑compliance. What feels different now is the speed at which these issues are being introduced into the conversation.

HMRC assess TTP’s in a broader context that includes governance, decision‑making and how directors have prioritised tax obligations relative to other creditors. Where HMRC considers that arrears have been allowed to build without clear justification, or engagement has been reactive, scrutiny quickly intensifies.

Certain themes are emerging in recent HMRC interactions:

• repeated or rolling TTP’s
• tax arrears increasing while other creditors continue to be paid
• delayed or inconsistent engagement with HMRC
• failing to submit returns
• limited or unconvincing evidence to support cash‑flow forecasts

None of these points automatically lead to personal liability but taken together, can materially increase risk. What starts as a routine request for flexibility can escalate into a discussion about director conduct and accountability.

The message for directors is clear: Time to Pay is not a low‑risk administrative exercise. It should be approached with the same preparation and care as any other restructuring or creditor negotiation. Early advice, clear documentation and a coherent rationale for decisions are critical.

Where tax arrears reflect broader financial distress, TTP should complement a wider restructuring strategy, not replace it. Directors who act early, transparently and with professional support are far better positioned to protect both the business and mitigate their personal exposure.