For UK businesses under pressure, tax arrears are rarely the result of poor intent. More often, they reflect cash-flow timing mismatches, unexpected growth, or external shocks that leave otherwise viable companies struggling to meet HMRC obligations when they fall due.
As an accountant, your clients will typically see HMRC Time To Pay (TTP) arrangements as the default solution. They are well known, appear straightforward, and are often positioned as supportive by HMRC. However, what is less widely understood is how damaging TTP arrangements can be for a business’s future funding prospects – and how financing tax liabilities through specialist lenders can often be a more strategic alternative.
This article explores the differences between financing tax liabilities and HMRC Time To Pay arrangements, the types of tax liabilities that can be funded, and why accountants should carefully consider the long-term consequences of TTP when advising clients.
Understanding HMRC Time To Pay Arrangements
HMRC Time To Pay arrangements allow businesses to spread outstanding tax liabilities over an agreed period, typically between 6 and 12 months, although longer terms may be granted in limited circumstances.
TTP can apply to a range of taxes, including VAT, PAYE, Corporation Tax and Self-Assessment liabilities. While this can provide short-term relief, it is important to recognise that a TTP arrangement is not a neutral event from a credit perspective.
Once in place, a TTP is effectively an admission that the business was unable to meet its tax obligations on time. This has implications far beyond HMRC.
The Hidden Impact of Time To Pay on Future Finance
One of the most significant issues with HMRC Time To Pay arrangements is how they are viewed by lenders.
From a funder’s perspective, HMRC is a priority creditor. If a business is already unable to pay HMRC on time, this raises immediate concerns about liquidity, financial control, and sustainability.
Key lender concerns with TTP arrangements:
- Evidence of cash-flow stress
- Missed statutory obligations
- Increased risk of arrears reoccurring
- HMRC’s preferential creditor status
- Potential enforcement action if terms are breached
Many mainstream lenders, including high-street banks and asset-based lenders, will either decline applications outright or significantly restrict facilities where an active TTP arrangement is in place.
Even alternative lenders that are more flexible will often price risk higher, reduce advance rates, or require personal guarantees.
In contrast, financing tax liabilities proactively – before entering TTP – often results in far better funding outcomes.
What Is Financing Tax Liabilities?
Financing tax liabilities involves using third-party commercial finance to settle outstanding tax debts in full, immediately removing HMRC arrears from the balance sheet.
Rather than being in arrears with HMRC, the business replaces the liability with a structured finance facility that aligns with cash flow and trading cycles.
From a credit standpoint, this is a fundamentally different position.
Types of Tax Liabilities That Can Be Funded
One of the most common misconceptions among business owners – and sometimes accountants – is that tax debts cannot be financed. In reality, a wide range of HMRC liabilities can be addressed through specialist funding.
VAT Arrears
VAT liabilities are among the most frequently funded tax debts.
Quarterly VAT payments often coincide with seasonal trading fluctuations, leaving businesses exposed to short-term cash-flow gaps. Financing tax liabilities related to VAT allows businesses to spread repayments over 6–24 months, smoothing working capital without triggering HMRC arrears.
PAYE and National Insurance Contributions
PAYE arrears are particularly sensitive, as they relate to employee deductions.
HMRC takes a strict view on PAYE, and repeated arrears can quickly escalate to enforcement. Financing tax liabilities for PAYE allows businesses to protect staff payroll, avoid HMRC scrutiny, and maintain compliance.
Corporation Tax
Corporation Tax is often due long after profits are earned, meaning funds may already have been reinvested or distributed.
For growing companies, financing tax liabilities linked to Corporation Tax can prevent disruption while preserving cash for expansion, recruitment or capital investment.
Self-Assessment Liabilities
For directors and business owners, large Self-Assessment bills can cause personal and business cash-flow strain simultaneously.
Structured financing tax liabilities solutions can consolidate personal tax exposure into manageable repayment plans, avoiding personal TTP arrangements that can affect credit profiles.
CIS Liabilities
Construction Industry Scheme (CIS) arrears are another common issue, particularly for subcontractor-heavy businesses.
Given HMRC’s aggressive stance on CIS compliance, financing tax liabilities early can prevent escalated enforcement and reputational damage.
Why Financing Tax Liabilities Is Often Preferable to TTP
From a purely tactical perspective, TTP appears cheaper. There are no arrangement fees, and interest is limited to HMRC’s statutory rate.
However, this narrow view ignores the strategic implications.
1. Improved Credit Profile
Lenders view financing tax liabilities as proactive financial management. Clearing HMRC arrears demonstrates control, planning, and lender engagement.
TTP, by contrast, signals distress.
2. Protection of Future Borrowing Capacity
Businesses with active TTP arrangements often find themselves unable to access:
- Asset finance
- Invoice finance
- Growth capital
- Refinancing facilities
By financing tax liabilities externally, businesses preserve their ability to raise funding when opportunities arise.
3. Reduced Risk of Enforcement
HMRC can withdraw a TTP arrangement at any time if terms are breached – even once.
Default can trigger:
- Penalties
- Enforcement notices
- Distraint action
- Winding-up petitions
Financing tax liabilities removes HMRC from the equation entirely, significantly reducing operational risk.
4. Better Cash-Flow Planning
TTP arrangements are rigid. HMRC rarely allows payment holidays or restructuring.
Commercial finance providers offering financing tax liabilities can often tailor repayments to seasonality, revenue cycles and forecasted growth.
The Accountant’s Role: Strategic Advisory, Not Just Compliance
For accountants, this is not about discouraging TTP in all cases. There are scenarios where it is appropriate, particularly for very short-term or one-off issues.
However, accountants play a critical role in helping clients understand:
- How lenders perceive HMRC arrears
- The long-term cost of restricted funding
- The difference between tactical relief and strategic finance
Introducing financing tax liabilities as an option positions the accountant as a strategic advisor rather than a reactive problem solver.
When TTP May Still Be Appropriate
It is important to be balanced.
TTP may be suitable where:
- The liability is small and short-term
- The business has no near-term funding needs
- There is strong confidence in immediate cash-flow recovery
Even in these cases, clients should be made aware of the potential downstream impact.
How Sorbus Finance Supports Accountants and Their Clients
At Sorbus Finance, we specialise in helping accountants secure structured solutions for financing tax liabilities without damaging long-term funding prospects.
We work alongside accountants to:
- Assess whether TTP or financing is more appropriate
- Structure tax funding aligned to cash flow
- Protect future borrowing capacity
- Remove HMRC pressure quickly and discreetly
By positioning financing tax liabilities as a strategic tool rather than a last resort, accountants can deliver better outcomes for their clients.
Final Thoughts
HMRC Time To Pay arrangements are often seen as the default solution to tax arrears, but they are far from consequence-free. For businesses with growth ambitions or future funding needs, TTP can quietly undermine financial flexibility.
Financing tax liabilities offers an alternative that clears HMRC exposure, protects credit profiles, and supports sustainable growth.
For accountants, understanding – and explaining – this distinction is key to delivering true advisory value.