Christopher Andersen
Written By Chris Andersen
Director & Licensed Insolvency Practitioner
July 12th, 2023

If you can’t pay your VAT on time or in full, you should contact HMRC’s Payment Support Service on 0300 200 3835 immediately to make them aware of the situation.

By contacting HMRC, you may be able to avoid late payment penalties, which will only make your financial situation worse, and be able to arrange a payment plan that gives you:

  • More time to pay
  • Allows you to pay your bill in instalments by direct debit.
Time to Pay Arrangements
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What is a Time to Pay Agreement?

If your company can’t pay VAT, you should contact HMRC to ask for a ‘Time to Pay Arrangement’ (TTP).

HMRC provides a ‘Business Payment Support Service’ that businesses can use if they are struggling to make a payment.

SMEs that are experiencing cash flow problems but which have a good compliance record should be able to make a Time to Pay arrangement with HMRC to pay their VAT bill over a longer term and in instalments.   

Why is the Business Unable to pay VAT?

Being unable or late to pay your VAT is a serious issue and HMRC will understandably want to know why this problem has occurred. One of the of the most important things HMRC will want to know is whether the business is genuinely unable to pay its VAT bill or if the company directors are simply unwilling to make the payment.

It is not uncommon for directors to have invested their working capital in growing the business rather than paying their tax liabilities, and in this case, it will be difficult to reach a Time to Pay arrangement.   

What are the Criteria for an HMRC Time to Pay Arrangement for VAT?

When discussing your circumstances with HMRC, the Business Payments Unit will want to know:

  • Why the company is unable to pay its VAT in full and on time
  • Whether you filed your VAT return on time
  • What you have done to try and raise the money to pay the debt
  • How much you can pay immediately
  • How long you think you will need to pay the rest

Depending on the reasons why the company can’t pay, what your payment history has been and how long you need to pay the bill, HMRC will assess your ability to make the future payments and decide whether to agree to a VAT payment plan.

Deciding how much you can Afford to pay in Installments

It’s essential you are realistic about how much of your VAT bill you will be able to repay each month. If you are unable to keep to the arrangement then the payment plan could be cancelled and penalties could apply. It will also be much more difficult to arrange another VAT payment plan if you have already defaulted on one. However, you also need to offer to repay an amount HMRC considers to be reasonable enough or it may refuse your proposal.

Need Advice?

Are you unable to pay your VAT bill in full and on time? We are regularly in contact with HMRC and have vast experience arranging VAT payment plans. For confidential, no-obligation advice, please contact 020 8444 3400.