The Time to Pay arrangement is the standard route, and it works in most cases. When HMRC refuses, withdraws an arrangement that was working, or won’t engage with the proposal you’ve made, the position gets harder quickly. This guide is for the moment after that conversation.
Why HMRC said no
A Time to Pay rejection carries more weight than it looks. It is usually the most informative signal HMRC give you about how they have classified the case internally.
The most common reasons in practice:
Outstanding returns.
HMRC won’t agree a TTP where tax returns aren’t filed and up to date, because they can’t quantify the debt. This is the easiest reason to fix: file the outstanding returns and resubmit.
The proposal is unaffordable on the numbers.
If your offer doesn’t match what HMRC’s affordability check says you can sustain, they’ll reject it as setting up a default. They look at company turnover, current trading, available assets and, crucially, whether you’ll be able to keep paying current liabilities while clearing the arrears.
Previous TTP defaults.
HMRC keeps detailed records of past arrangements. A history of missed or renegotiated TTPs significantly reduces the prospects of another one. Once HMRC sees a pattern, the bar moves.
Multiple tax types in arrears.
Behind on Corporation Tax is one conversation. Behind on Corporation Tax, PAYE, NIC and VAT simultaneously is a very different one, particularly because PAYE and VAT count as monies the company collected on HMRC’s behalf rather than its own.
Ongoing losses with no turnaround plan.
If the financial position shows continued losses with no credible plan to reverse them, HMRC will often decide that a TTP only delays what’s coming. They’d rather see formal insolvency early than fund another six months of additional debt.
You called too late.
This is the one most directors don’t see. Once enforcement is already running (distraint begun, a winding–up petition in preparation, a Personal Liability Notice being considered), HMRC’s appetite for engagement drops. The internal classification has changed, and a TTP request at that stage is often viewed as a delay tactic rather than a genuine resolution.
If your rejection came with reasons, read them carefully. They contain the answer to what would change HMRC’s position.
The first 24 hours
A rejected TTP doesn’t trigger anything automatic. HMRC won’t show up tomorrow. But the period immediately after rejection is when directors most commonly make the moves that make the position worse.
- Don’t ignore the rejection letter. HMRC reads silence as confirmation that engagement has ended. From their internal perspective, you’ve moved from “wanting to pay” to “won’t pay.”
- Don’t pay other creditors ahead of HMRC. This sounds obvious and it’s the single most common pattern HMRC look for when assessing director conduct. Paying suppliers, the bank, or yourself in priority to HMRC at this point is exactly the behaviour that gets a Personal Liability Notice considered later.
- Don’t use PAYE or VAT for cashflow. PAYE you’ve deducted from staff and VAT you’ve collected from customers are taxes the company holds on HMRC’s behalf. Using those balances to fund payroll, supplier payments or rent is the specific conduct most likely to trigger HMRC’s enforcement powers against you personally rather than the company.
- Don’t accept the rejection as final without understanding why. Ask in writing for the specific reasons. Where the rejection is based on something fixable (outstanding returns, an inadequate proposal, missing financial evidence), a resubmission can succeed.
The escalation ladder
If nothing changes after a TTP rejection, HMRC’s collection process follows a predictable sequence.
The escalation ladder isn’t linear and isn’t published. HMRC will often skip steps where they have reason to. The petition is often the first concrete signal that the earlier steps have been completed internally.
Your options after rejection
Six broad routes remain after a TTP is refused. The right combination depends on the underlying position of the company.
- Resubmit with a better proposal. Where the rejection was based on something fixable, a resubmitted proposal with proper financial evidence (cashflow forecast, management accounts, evidence of failed refinance attempts, professional representation) often succeeds where the first attempt failed. HMRC officers will tell you they treat each proposal on its merits. They do, but the merits are different the second time round.
- Pay the debt in full. Refinance, director loan to the company, asset sale, factoring. If the funds can be found, paying ends the immediate problem. The trade–offs are personal: director loans become company creditors that rank behind HMRC if things deteriorate further, and secured refinance reduces the value available to other creditors. Worth modelling before committing.
- Company Voluntary Arrangement (CVA). A formal proposal to creditors (including HMRC) to repay a percentage of the debt over a defined period. Critically, a CVA binds HMRC through a creditor vote rather than through HMRC’s individual agreement. This means a CVA can succeed in restructuring HMRC debt where a TTP has failed, because HMRC don’t have an individual veto in the same way. CVAs require licensed Insolvency Practitioner involvement and a credible underlying business.
- Administration. Places the company under the control of a licensed administrator and triggers a moratorium that pauses creditor action, including HMRC enforcement and any winding–up petition. The administrator’s job is to rescue the company as a going concern, or achieve a better outcome for creditors than liquidation. Administration is procedurally significant: it stops the clock on HMRC’s enforcement and creates space for a structured solution.
- Creditors’ Voluntary Liquidation (CVL). Where the company is not viable, taking control of the liquidation process rather than waiting for HMRC’s winding–up petition to do it for you is usually the better outcome. It demonstrates director responsibility, gives the directors a measure of choice over the appointed Insolvency Practitioner, and consistently produces better outcomes in any subsequent conduct investigation.
- Negotiate a variation. Rare, but not impossible. Where the underlying TTP would work with longer terms, lower instalments or different security arrangements, a structured renegotiation through the right channels can sometimes succeed where a like–for–like resubmission would not.
What HMRC actually look at
A rejected TTP can become an accepted TTP. The difference is often less about the headline numbers and more about how the proposal is constructed.
Having spent eight years working at HMRC and fifteen years as a tax consultant before qualifying as a solicitor, I know what the affordability assessment looks at, how the case officer’s decision interacts with the manager’s review, and what causes proposals to be referred up the chain versus settled at the first point of contact.
The proposals that work share certain features. They demonstrate that the company can meet current liabilities while clearing the arrears, supported by independent evidence rather than director assertions alone. They engage with the specific reasons the first proposal failed, and they come from someone HMRC views as a credible representative.
The proposals that fail have their own pattern. They use round numbers without supporting calculations, aspirational forecasts that don’t survive scrutiny, and submission letters that read like negotiations rather than evidence. They often address the specific arrears mix poorly, packaging VAT and PAYE arrears into a single proposal when each should be addressed differently.
This is where specialist representation moves the needle most.
The trust monies trap
PAYE and VAT sit in a different category from other tax debts, and the distinction matters more than most directors realise.
When a company pays staff, the PAYE deducted from their wages and the employer’s NIC contributions belong to HMRC, deducted by the company on HMRC’s behalf. The same applies to VAT, which is collected from customers, held by the company, and remitted to HMRC.
When a company uses these balances to fund cashflow (paying suppliers, rent or other wages), HMRC’s view is that the company has used HMRC’s own money to subsidise its trading. The legal position is more nuanced, but the commercial reality inside HMRC’s enforcement framework follows that view.
Using PAYE or VAT balances for cashflow is the specific conduct most likely to trigger consideration of a Personal Liability Notice. It is also where the right early intervention, including legitimate alternatives like a Direct Debit arrangement for PAYE going forward, can prevent the escalation that follows.
When personal liability comes into the picture
A Personal Liability Notice (PLN) under section 121C of the Social Security Administration Act 1992 allows HMRC to transfer a company’s unpaid NIC liability to a director personally. A separate mechanism under section 61 of the VAT Act 1994 can do the same for VAT penalties involving dishonesty.
PLNs aren’t automatic. HMRC must prove, on the balance of probabilities, that the company’s failure to pay was attributable to the director’s fraud or neglect. Neither commercial failure on its own nor a single oversight crosses that threshold. The threshold is conduct: specifically, the kind that includes prioritising other creditors over HMRC, using PAYE and VAT for working capital, or maintaining a pattern of non–payment across multiple periods.
The defence to a PLN centres on demonstrating that you took reasonable steps. Reliance on professional advice. Documented decision–making. Engagement with HMRC throughout. Transparency about the company’s position.
This is also where the timing of specialist advice matters most. HMRC frequently forms a view about director conduct long before issuing the notice. Engaging with HMRC without representation in the months before a PLN can result in explanations that later become the foundation of HMRC’s case.
If you’ve received a PLN, or if you’ve been told one is being considered, this isn’t TTP territory any more. It’s a separate process with separate procedure and short response windows.
What this means today
A rejected TTP opens a different conversation with HMRC. It signals how HMRC has currently classified the case, and asks for a sharper response rather than disengagement.
The window between rejection and enforcement is usually weeks rather than days. It’s wider than the seven–day Gazette window after a petition is served, but it’s narrowing. The right move depends on the underlying viability of the business, the mix of arrears, and the conduct that’s already on the record.
If HMRC have rejected a payment plan and you’d like to talk through what’s still available, book a free thirty–minute call. Where HMRC is the petitioner, knowing what they’ll actually accept matters as much as knowing the procedure.
