Most business owners think that once HMRC sets a deadline, that’s it - miss it and you’re doomed to penalties, interest and stress. But that’s not always true. If your business genuinely can’t pay its Corporation Tax bill in full, HMRC may actually work with you to find a solution.

It’s called a ‘Time to Pay’ arrangement, and it’s a formal payment plan that lets you spread your Corporation Tax bill over several months, so you can stay compliant while keeping cash flow steady.

In this guide, we’ll explain exactly how these arrangements work, how to apply for one, and what to expect along the way. Looking for information about VAT time to pay options instead? Check out our guide on setting up a VAT payment plan.

What is a Time to Pay arrangement?

A Time to Pay (TTP) arrangement is HMRC’s way of helping businesses that are temporarily struggling to pay their Corporation Tax bills in full. Instead of demanding immediate payment, HMRC allows you to spread the debt over a set period, usually between 3 and 12 months, depending on your circumstances.

You’ll still need to pay interest on the outstanding balance - currently 8% (as of October 2025 - see the full tax rates, thresholds, bands and allowances for more information) - but you’ll avoid more serious consequences like penalties, legal action or debt collection, as long as you stick to the agreed schedule.

Think of it as a payment plan rather than a free pass: you’re still responsible for the full amount, but you’re given breathing space to pay it off gradually.

When can you use a Corporation Tax payment plan?

HMRC’s payment plans are designed for businesses facing temporary financial difficulties, not those in long-term distress. You’ll need to show that your company is normally reliable with its tax obligations and that you have a realistic plan for getting back on track.

You can apply for a Time to Pay arrangement if:

• You can’t pay your Corporation Tax by the deadline.
• Your company is otherwise up to date with filings and past payments.
• You can show evidence of short-term financial hardship.

If your business has a consistent record of late payments or missed filings, HMRC may be less sympathetic. But if this is a one-off situation caused by a short-term issue, they’re generally willing to help.

{{ltd-guide}}

How to apply for a Time to Pay arrangement

The process depends on whether your tax bill is due yet and how much you owe.

Here’s how it typically works:

1. Contact HMRC early

Don’t wait until you’ve missed the payment deadline. HMRC looks more favourably on businesses that get in touch before their payment is overdue. You can call the HMRC Business Payment Support Service (on 0300 200 3835) or contact your Corporation Tax office directly.

When you call, have the following details ready:

• Your company’s name, UTR (Unique Taxpayer Reference) and registered address.
• The amount you owe and when it’s due.
• An honest assessment of what you can afford to pay and when.
• A breakdown of your company’s income, expenses and cash flow projections.

2. Explain your situation

You’ll need to clearly explain why you can’t pay on time. Maybe your cash flow has been affected by a late-paying customer or a seasonal dip in sales. HMRC wants to see that you understand your finances and that the issue is temporary, not chronic.

3. Propose a realistic payment plan

Be practical about what your company can afford. HMRC would rather agree to a realistic six-month plan you can stick to than a three-month plan you’ll struggle to maintain. Payment schedules are usually monthly, and direct debit is the preferred method.

4. Get written confirmation

If HMRC agrees to your proposal, they’ll send written confirmation outlining the terms, including how much you need to pay each month, when payments are due, and how much interest you’ll pay. Stick to the plan and you’ll avoid penalties and enforcement action.

What happens if you miss a payment?

If you fall behind on your Time to Pay plan, HMRC can cancel the arrangement immediately. That means your remaining balance becomes due in full, and enforcement measures - like penalties, debt collectors, or even legal action - could follow.

If you think you might miss a payment, contact HMRC as soon as possible. They may be willing to adjust the plan if you explain your situation early. Silence, on the other hand, is a red flag that makes them much less flexible.

What interest and penalties apply?

A Time to Pay arrangement doesn’t wipe out interest. HMRC still charges it daily on the outstanding balance. The current late payment interest rate (as of 2025) is 8%, and it applies from the day after your Corporation Tax due date until the balance is fully paid.

However, by agreeing a TTP plan, you’ll avoid late payment penalties, which can be far more costly. Those penalties kick in if HMRC hasn’t heard from you, so being proactive really does pay off.

What if HMRC rejects your payment plan?

If HMRC declines your application, it’s usually because:

• You didn’t provide enough financial information.
• Your proposal wasn’t realistic based on your income and cash flow.
• You have a history of non-compliance.

You can reapply if your circumstances change, or you can speak with an accountant or tax advisor to help strengthen your case. Sometimes, professional representation makes all the difference when negotiating with HMRC.

Tips for successfully managing a payment plan

Setting up a payment plan is only half the job. The real challenge is sticking to it. Here are some practical ways to make sure you don’t fall behind again:

• Set up automated payments: A direct debit helps you avoid missing instalments.
• Keep cash flow forecasts updated: Know what’s coming in and going out at least three months ahead.
• Budget for future tax bills: Once you’re back on track, start setting aside money monthly for the next Corporation Tax payment.
• Keep communication open: If your circumstances change, tell HMRC early rather than waiting for a missed payment.
• Get professional help: A professional tax advisor or accountant, like one of our friendly team at Crunch, can help you assess affordability, negotiate terms, and manage your company’s wider finances.

How Crunch can help

If you’re feeling stressed about an upcoming Corporation Tax bill, you’re not alone - and you don’t have to figure it out alone either.

At Crunch, our team of expert accountants helps small business owners and limited companies stay on top of their tax obligations and reducing your Corporation Tax Bill legally. Our team can even set up Time to Pay arrangements when things get tight. We can liaise with HMRC on your behalf, make sure your proposal is realistic and ensure you don’t miss key deadlines.

A Corporation Tax payment plan should be a safety net, not a strategy. With the right support, you can get back on your feet and keep your business running smoothly.

Staying on good terms with HMRC

A Time to Pay arrangement is proof that HMRC understands real life doesn’t always go to plan. If you’re transparent, proactive and realistic, they’ll usually meet you halfway.

So, if you know your Corporation Tax payment isn’t going to make it in time, don’t bury your head in the sand. Contact HMRC, make a plan, and show you’re serious about paying what you owe - just at a pace your business can handle.

‍