Thinking of applying for a Time to Pay Arrangement with HMRC? We explain everything care businesses need to know.
The care sector is under enormous financial pressure. Rising staffing costs, inflation, increasing energy bills, regulatory demands, and delayed local authority payments are all creating significant challenges for care homes across the UK.
For many providers, one of the earliest signs of financial difficulty is struggling to keep up with HMRC payments and business tax. VAT, corporation tax, PAYE, and National Insurance liabilities can quickly build up during periods of cash flow pressure, particularly when care homes are prioritising wages, agency staffing, and day-to-day operational costs to maintain continuity of care.
While falling behind on tax payments can feel overwhelming, it is important to know that support may be available. In some cases, HMRC may agree to a Time to Pay arrangement, giving care homes valuable breathing space to repay outstanding tax liabilities over a more manageable period.
In this article, we explain what a HMRC Time to Pay arrangement is, when it may be suitable, how care homes can negotiate one successfully, and what options are available if HMRC refuses an agreement.
What Is a HMRC Time to Pay Arrangement?
A Time to Pay arrangement is an agreement between a business and HMRC that allows outstanding tax liabilities to be repaid in instalments over an agreed period of time.
Rather than demanding immediate payment in full, HMRC may allow businesses to spread repayments across several months if they believe the business is viable and capable of maintaining future tax obligations.
For care homes, a Time to Pay arrangement can help relieve short-term cash flow pressure and avoid more serious enforcement action while the business works to stabilise its financial position.
TTP arrangements are commonly used for:
- VAT arrears
- PAYE and National Insurance liabilities
- Corporation Tax debts
- Self Assessment liabilities
However, HMRC will not automatically approve an arrangement simply because a business requests one. Care homes must demonstrate that the financial difficulties are temporary and that the business can realistically afford the proposed repayments.
When Could a Time to Pay Arrangement Be the Right Solution?
A Time to Pay arrangement may be appropriate where a care home is experiencing short-term cash flow difficulties but remains fundamentally viable.
For example, a provider may have:
- Delayed local authority payments
- Temporary occupancy issues
- Rising staffing or agency costs
- Seasonal cash flow pressure
- Unexpected operational expenses
In these situations, spreading HMRC liabilities over a longer period can help relieve immediate financial strain and allow the business time to recover.
However, a TTP arrangement is unlikely to solve deeper structural financial problems on its own. If a care home is consistently unable to meet ongoing liabilities, experiencing significant creditor pressure, or operating at a sustained loss, broader restructuring or insolvency advice may be needed.
When Might HMRC Refuse a Time to Pay Arrangement?
HMRC is generally more willing to support businesses that engage early and demonstrate a genuine intention to resolve the situation.
However, care homes may struggle to secure a TTP arrangement if:
- Previous Time to Pay agreements have been breached
- Tax returns have not been filed
- The business cannot afford the proposed repayments
- There is no evidence the business is viable
- HMRC believes the debt position will continue worsening
- Directors delay communication until enforcement action has started
HMRC will also look closely at whether the business is keeping up with current tax liabilities while repaying historic arrears. If a provider cannot maintain ongoing obligations, HMRC may decide that a repayment arrangement is not sustainable.
How to Prepare Before Negotiating With HMRC
Preparation is essential when negotiating a Time to Pay arrangement. HMRC will expect care homes to provide accurate financial information and realistic repayment proposals.
Before contacting HMRC, directors should ensure they fully understand the business’s financial position, including:
- Outstanding tax liabilities
- Cash flow forecasts
- Upcoming payroll commitments
- Supplier and creditor balances
- Expected incoming payments
- Occupancy levels and projected income
It is also important to identify what caused the financial difficulties in the first place and explain what steps are being taken to improve the situation.
For example, HMRC may respond more positively if a care home can demonstrate that it has already taken proactive action such as reducing unnecessary costs, improving cash flow management, or renegotiating supplier arrangements.
Having clear and realistic financial forecasts is particularly important. Offering repayments that the business cannot genuinely afford will usually create further problems later on.
How Much Should a Care Home Offer to Pay?
One of the biggest mistakes businesses make when negotiating with HMRC is agreeing to repayments that are unrealistic simply to secure approval.
Any repayment proposal should be based on what the care home can genuinely afford after covering essential operational costs, including staffing, utilities, insurance, food supplies, and care provision.
HMRC will usually expect businesses to pay as much as possible towards the debt while remaining sustainable. This means directors should prepare detailed cash flow forecasts showing how repayments will be maintained alongside ongoing tax obligations.
It is often better to propose a realistic arrangement over a slightly longer period than to agree to repayments that quickly become unmanageable.
Care homes should also avoid prioritising HMRC repayments at the expense of operational stability. Maintaining safe staffing levels and continuity of care must remain a priority.
What Happens if HMRC Refuses the Arrangement?
If HMRC refuses a Time to Pay arrangement, it is important not to ignore the situation.
At this stage, directors should seek professional advice immediately to explore alternative options and reduce the risk of enforcement action escalating further.
Depending on the circumstances, possible alternatives may include:
- Negotiating revised proposals with HMRC
- Seeking refinancing or additional funding
- Exploring operational restructuring
- Negotiating with wider creditors
- Considering formal rescue procedures such as a Company Voluntary Arrangement (CVA)
Licensed insolvency practitioners may also be able to negotiate directly with HMRC on behalf of the business and help present stronger financial information to support the proposal.
What Happens if a Payment Is Missed?
Missing payments under a Time to Pay arrangement is a serious issue and can lead to the agreement being cancelled.
If this happens, HMRC may resume enforcement action immediately, which could include:
- Penalties and interest charges
- Debt collection action
- County Court Judgments
- Enforcement officers attending the premises
- Winding up petitions
For this reason, directors should never agree to repayments they are unlikely to maintain.
If a care home believes it may miss a payment, it is important to contact HMRC as early as possible rather than waiting for the arrangement to fail. In some cases, HMRC may agree to review or amend the arrangement depending on the circumstances.
What Other Options Are Available?
While a Time to Pay arrangement can be extremely helpful for some care homes, it is not always the right long-term solution.
Where financial pressures are more severe, businesses may need to explore wider turnaround or restructuring options.
Depending on the situation, this could include:
Informal Creditor Negotiations
Some suppliers, landlords, or lenders may agree to revised payment terms or temporary breathing space while the business stabilises.
Refinancing or Funding Solutions
Additional funding, asset finance, or invoice finance may help improve short-term working capital where the underlying business remains viable.
Company Voluntary Arrangement (CVA)
A company voluntary arrangement is a formal agreement with creditors that allows businesses to repay debts over time while continuing to trade. Learn more about how to apply for a CVA here.
Administration
Where creditor pressure is severe, administration may provide legal protection while a rescue or restructuring strategy is explored.
How McAlister & Co Can Help
At McAlister & Co, we understand the financial pressures facing care homes and the challenges directors face when balancing rising costs with the responsibility of delivering high-quality care.
If your care home is struggling with HMRC arrears or broader financial difficulties, our experienced business rescue and insolvency specialists can help you understand your options and take control of the situation.
We can assist with:
- Negotiating HMRC Time to Pay arrangements for care homes
- Reviewing cash flow and financial viability
- Creditor negotiations
- Business restructuring strategies
- Formal rescue procedures where necessary
Most importantly, we provide clear, practical, and compassionate advice tailored to your individual circumstances.
Need Further Advice About Time to Pay Arrangements for Care Homes?
Many care homes are currently facing significant financial pressure, and struggling to keep up with HMRC payments is often one of the earliest warning signs of wider financial difficulty.
A HMRC Time to Pay arrangement can provide valuable breathing space for viable care businesses experiencing temporary cash flow problems. However, it is important to approach negotiations realistically, prepare thoroughly, and seek advice early if financial pressures continue to grow.
If your care home is struggling with HMRC debt or wider financial challenges, speaking to an experienced insolvency and business rescue specialist can help you understand the options available and protect the future of your service. Contact us today to find out more about how we can help.
Frequently Asked Questions
What is an HMRC Time to Pay arrangement?
An HMRC Time to Pay arrangement is a repayment agreement that allows businesses to spread outstanding tax liabilities over an agreed period rather than paying the full amount immediately. The arrangement can help care homes manage temporary cash flow difficulties while continuing to meet their ongoing financial obligations.
Can care homes apply for an HMRC Time to Pay arrangement?
Yes, care homes can apply for an HMRC Time to Pay arrangement if they are experiencing temporary financial difficulties and are unable to pay their tax liabilities in full. HMRC will usually assess the business's financial position, repayment history, and ability to meet future tax obligations before deciding whether to approve the request.
What taxes can be included in an HMRC Time to Pay arrangement?
An HMRC Time to Pay arrangement may be available for a range of tax liabilities, including VAT, PAYE, National Insurance contributions, Corporation Tax, and Self Assessment tax debts. The taxes included will depend on the circumstances of the business and HMRC's assessment of the proposal.
What happens if a care home misses a payment under an HMRC Time to Pay arrangement?
Missing a payment under an HMRC Time to Pay arrangement can result in HMRC cancelling the agreement and resuming enforcement action. This may include penalties, interest charges, debt collection activity, or further legal action. If a payment issue arises, it is important to contact HMRC as soon as possible.
How can a care home improve its chances of securing an HMRC Time to Pay arrangement?
Care homes can improve their chances of obtaining an HMRC Time to Pay arrangement by engaging with HMRC early, ensuring all tax returns are up to date, preparing accurate cash flow forecasts, and proposing realistic repayment amounts. Seeking professional advice can also help present a stronger case and demonstrate that the business remains viable.