Business Funding With an HMRC Payment Plan UK: Can You Qualify in 2026?
By Jodhbir Mehmi | Mehmi Financial Group
Last reviewed: 18 October 2026
Can you get business funding with an HMRC payment plan in the UK? Yes, potentially. Having an active HMRC Time to Pay arrangement does not automatically prevent a business from qualifying for commercial finance.
Some UK business lenders may consider applications from companies with existing tax arrears, provided the business can demonstrate sufficient trading income, an affordable repayment arrangement and the capacity to meet its ongoing financial obligations.
However, eligibility depends on the lender's policies and the circumstances behind the tax debt.
A business with an agreed HMRC payment plan that has been maintained consistently may be assessed differently from a company with missed instalments, escalating tax liabilities or active enforcement proceedings.
Financing options may include specialist business loans, merchant cash advances, invoice finance, asset-based lending and certain secured commercial facilities.
Not every provider accepts active HMRC arrangements, and some may require outstanding tax debts to be cleared before advancing additional funds.
This guide explains how business funding with an HMRC payment plan works in 2026, what lenders assess, how VAT and PAYE arrears can affect approval and which financing options may be available.
Can You Get a Business Loan With an HMRC Payment Plan?
Yes, some UK businesses with active HMRC payment arrangements may still be considered for business loans. However, approval is not guaranteed.
An HMRC payment plan indicates that the business has previously been unable to settle a tax liability in full by its original deadline.
From a lender's perspective, this creates two important considerations.
First, the business has an existing financial obligation that must be included in affordability calculations.
Second, the lender needs to understand whether the original cash-flow problem has been resolved or is continuing.
For example, consider two hypothetical UK limited companies.
The first operates profitably, has maintained its HMRC instalments for six consecutive months and is meeting all new tax obligations.
The second has missed several HMRC payments, has additional unpaid VAT and is experiencing declining turnover.
Although both businesses technically have HMRC payment arrangements, they present materially different risks.
A lender may be willing to assess the first company while declining the second.
The existence of a payment arrangement is therefore only one part of the underwriting assessment.
What Is an HMRC Time to Pay Arrangement?
An HMRC Time to Pay arrangement, often abbreviated to TTP, allows eligible individuals and businesses that cannot pay certain tax liabilities by the due date to settle those amounts through an agreed payment schedule.
HMRC assesses the taxpayer's financial circumstances before deciding whether to approve a proposal.
The arrangement may apply to outstanding liabilities such as VAT, PAYE, National Insurance contributions, Corporation Tax or Self Assessment, depending on the applicant and circumstances.
An approved arrangement generally involves agreed instalments over a period HMRC considers appropriate.
According to GOV.UK's guidance on paying tax in instalments, HMRC considers the applicant's income, expenditure, existing liabilities and available financial resources when evaluating a payment proposal.
How Long Can an HMRC Payment Plan Last?
HMRC's public guidance states that there is no universal fixed maximum period for an individual payment plan.
However, HMRC's internal Time to Pay guidance explains that arrangements for business tax debts should generally be shorter than 12 months.
Periods exceeding 12 months are exceptional and ordinarily require additional authorisation.
The actual period depends on affordability, the amount outstanding and the circumstances of the business.
A company should not assume that HMRC will approve a 24-month or 36-month plan simply because spreading the balance over a longer period would reduce monthly payments.
Does HMRC Reduce the Amount of Tax Owed?
No. An ordinary Time to Pay agreement is not a tax debt forgiveness programme.
HMRC's internal guidance states that it cannot reduce the principal tax liability simply by agreeing a Time to Pay arrangement.
The purpose is to allow an eligible business additional time to settle the outstanding amount.
Interest may also continue to accrue until the relevant tax liability is fully paid.
Can You Obtain New Finance While on Time to Pay?
Potentially.
HMRC's internal guidance recognises that businesses may raise funds through bank loans, overdrafts, factoring, invoice discounting, director funding and other financing sources.
However, the business must remain capable of honouring its HMRC agreement and paying new tax liabilities as they become due.
Taking additional finance should not make the existing arrangement unaffordable.
Sources: HMRC Time to Pay Principles and HMRC Guidance on Other Sources of Funds.
Does Having an HMRC Payment Plan Affect Business Loan Eligibility?
It can.
A lender may treat an active payment plan as evidence of previous or current cash-flow difficulties.
However, the effect depends on the lender's criteria and the overall financial position of the business.
Status of the Payment Arrangement
A formally agreed HMRC Time to Pay arrangement is different from an outstanding tax debt with no repayment agreement.
A lender may consider whether the plan is active, whether payments are up to date and whether the borrower has complied with the agreed conditions.
An active, well-maintained plan can provide clearer information about the business's outstanding obligations.
It does not, however, eliminate the underlying arrears or guarantee approval.
Amount of Outstanding Tax Debt
The size of the HMRC liability matters relative to business revenue, profitability and available cash flow.
For example, a company with £10,000 of remaining tax arrears and substantial recurring cash generation may be assessed differently from a business with £150,000 outstanding and limited liquidity.
The lender may examine both the absolute amount and the financial burden of the instalments.
Reason for the Tax Arrears
Lenders may want to understand why the business required a payment arrangement.
Possible explanations include a large customer paying late, unexpected expenditure, seasonal trading or a temporary reduction in revenue.
The reason should be supported by business records.
A temporary, identifiable cash-flow problem is different from ongoing operating losses that prevent the company from meeting normal tax obligations.
Existing Payment History
Evidence that the business has consistently paid its HMRC instalments can help demonstrate recent payment conduct.
However, the number of payments made does not automatically determine eligibility.
A lender will still consider future affordability and the wider financial position.
Current Tax Compliance
A business maintaining its existing arrangement but falling behind on new VAT or PAYE liabilities may raise significant concerns.
HMRC expects businesses on Time to Pay to remain capable of paying new tax liabilities outside the agreed arrangement.
The same principle is relevant to commercial lending: the business must demonstrate that new financing will not simply create another cycle of unpaid obligations.
Can You Get Business Funding With VAT Arrears?
Potentially, depending on the lender and the circumstances of the arrears.
VAT liabilities can arise when a business collects VAT on taxable sales but does not have enough cash available to settle its tax obligation at the relevant deadline.
A company may have substantial annual turnover while experiencing difficulty paying a particular VAT bill because of supplier costs, delayed customer payments or other expenditure.
However, VAT arrears are an important underwriting consideration.
What Lenders May Review
A finance provider may examine the VAT balance, whether the relevant returns have been submitted, the status of the HMRC payment plan and whether payments are being maintained.
It may also review whether the company is setting aside sufficient funds for future VAT liabilities.
A business consistently using money intended for VAT payments to cover ordinary trading expenses may have an underlying working-capital problem.
Can an HMRC VAT Payment Plan Reduce Penalties?
Potentially.
For VAT accounting periods within the current late-payment penalty regime, an accepted Time to Pay proposal can reduce or prevent certain late-payment penalties depending on when the proposal was made.
For example, HMRC states that submitting a proposal that leads to an agreed Time to Pay arrangement within the first 15 days after the payment deadline can prevent the relevant VAT late-payment penalty.
However, late-payment interest continues on outstanding VAT.
If the business fails to comply with the arrangement, HMRC may cancel it and apply penalties as though the agreement had not existed.
The applicable rules depend on the tax period and individual circumstances.
Source: HMRC — How VAT Late Payment Penalties Work.
Can You Get Business Funding With PAYE or National Insurance Arrears?
Potentially, but lenders may assess PAYE and National Insurance arrears carefully.
Employers are responsible for operating PAYE and paying the relevant taxes and National Insurance contributions to HMRC.
An established business may fall behind because of temporary cash-flow difficulties, but continuing PAYE arrears can indicate that normal operating obligations are not being met.
A lender may review how much is outstanding, whether HMRC has accepted a repayment proposal and whether recent payroll tax liabilities are being paid.
Why PAYE Arrears Can Be Particularly Important
Certain taxes collected or deducted by a business on behalf of others have a special status in insolvency.
Since December 2020, specified unpaid HMRC liabilities, including VAT, PAYE income tax and employee National Insurance contributions, can rank as secondary preferential debts in applicable formal insolvency proceedings.
This can affect the recoveries available to some secured lenders, particularly those relying on floating-charge security over business assets.
However, not every category of tax receives this preferential status.
For example, Corporation Tax is not included in the same specified category of secondary preferential HMRC debts.
This distinction may be relevant when a lender assesses security and outstanding tax obligations.
Source: GOV.UK — HMRC as a Preferential Creditor.
Can You Get Funding With Corporation Tax Arrears?
Potentially.
A UK limited company with an active Corporation Tax Time to Pay arrangement may still be considered for certain forms of commercial finance.
However, the lender will want to establish whether the company has sufficient financial capacity to service both the tax arrangement and any proposed new loan.
For example, a business may have generated accounting profits during a previous financial year but subsequently experienced reduced trading cash flow.
This can create a mismatch between the Corporation Tax liability and the cash available when payment becomes due.
A lender may review recent management accounts, bank statements, operating cash flow and existing debt obligations to understand the company's current financial position.
Corporation Tax arrears should be disclosed accurately rather than treated as an ordinary operating expense without explanation.
Where the company has repeated difficulty paying Corporation Tax, it should consider whether forecasting, dividend policy, working-capital management or wider financial performance needs attention.
Can Sole Traders Get Business Funding With an HMRC Payment Plan?
Potentially, although the legal and financial position differs from that of a limited company.
A sole trader may have a personal Self Assessment Time to Pay arrangement relating to income tax and other applicable liabilities.
Because a sole trader and the business are not separate legal persons in the same way as a limited company, personal tax obligations can be relevant to the financing assessment.
Some providers consider sole traders, while others lend only to eligible limited companies or partnerships.
A sole trader should confirm whether the funding programme accepts their business structure and whether the tax liability is relevant to its underwriting requirements.
A personal Self Assessment payment arrangement should not automatically be treated as equivalent to a limited company's Corporation Tax or VAT arrangement.
Best Business Funding Options With an HMRC Payment Plan UK
There is no single financing product designed for every business with outstanding tax obligations.
The appropriate funding structure depends on the purpose, available assets, sales activity and financial health of the business.
1. Specialist Unsecured Business Loans
Some alternative commercial lenders may consider businesses with historic or ongoing financial difficulties.
An unsecured business loan generally provides a defined funding amount with scheduled repayments.
The lender may assess bank statements, profitability, trading history, existing liabilities and credit information.
An HMRC Time to Pay arrangement may affect the decision, even where the business otherwise satisfies the lender's minimum trading requirements.
Potentially suitable for: Established businesses with manageable HMRC instalments, sufficient cash generation and a legitimate working-capital requirement.
Important limitation: Unsecured does not necessarily mean that no personal guarantee is required.
Furthermore, a lender may refuse an application where active tax arrears breach its credit policy.
2. Merchant Cash Advances
A merchant cash advance allows an eligible business to access funding against qualifying future debit and credit card sales.
Collections are generally linked to an agreed percentage of eligible card receipts.
This may be relevant to restaurants, takeaways, retail shops, pubs, convenience stores and other businesses receiving substantial electronic card payments.
The British Business Bank's merchant cash advance guidance explains that MCAs can be an option for certain businesses with substantial card transactions.
However, outstanding HMRC obligations can still affect underwriting.
An MCA provider may assess whether the business can support card-sales collections alongside its existing tax instalments.
For example, a restaurant already paying HMRC £3,000 per month may struggle if a new MCA collects a further £4,000 from incoming card revenue.
A merchant cash advance should not automatically be used to replace tax arrears with more expensive commercial debt.
3. Invoice Finance
Invoice finance may be relevant where a business has eligible unpaid invoices owed by commercial customers.
Under factoring or invoice discounting arrangements, a provider may advance money against qualifying receivables.
For example, a manufacturing business might have £80,000 in approved invoices owed by established commercial customers.
Those receivables may provide a potential financing source, subject to customer quality, existing security and the invoice finance provider's criteria.
However, HMRC arrears may affect eligibility, particularly where the lender relies on security over receivables and must assess creditor priorities.
A Time to Pay agreement does not automatically make the invoices eligible.
Potentially suitable for: Business-to-business companies with established customers and genuine qualifying receivables.
4. Equipment Refinancing and Sale-and-Leaseback
Businesses owning valuable commercial equipment may be able to investigate asset-backed finance or sale-and-leaseback arrangements.
Potential assets include commercial vehicles, machinery, manufacturing equipment and certain specialist business assets.
The financing provider may assess ownership, market value, existing charges and the asset's condition.
For example, a company owning qualifying equipment outright may be able to release some of its value through an appropriate financing structure.
However, available funding depends on lender policy and the asset's valuation.
HMRC obligations, existing lender charges and security ranking can also influence the transaction.
5. Secured Business Loans
A business with suitable property or other acceptable assets may be able to explore secured commercial borrowing.
A secured lender may consider collateral value alongside cash flow, debt obligations and tax arrears.
However, security does not eliminate underwriting concerns.
A company unable to service additional borrowing may still be declined despite owning substantial assets.
Owners should also consider the risk of losing pledged assets if the financing obligations are not met.
6. Business Overdrafts and Revolving Credit Facilities
A revolving credit facility may support a business experiencing repeated but manageable timing gaps between customer receipts and operating expenses.
However, an active HMRC payment arrangement may make obtaining new bank credit more difficult.
The lender will assess current financial commitments, affordability and its existing exposure.
For a business already struggling to maintain tax instalments, a new revolving facility may not be an appropriate solution.
7. Director Funding or New Equity
External borrowing is not the only way to address a business cash-flow shortage.
Where commercially appropriate, company owners may consider additional equity investment or properly documented director loans.
HMRC's internal guidance recognises director funding and equity as possible business financing sources.
However, owners should consider personal financial risks, tax implications and the company's overall viability.
These options should not be used to postpone an insolvency problem without professional advice.
How Much Funding Can You Get With an HMRC Payment Plan?
There is no universal maximum funding amount for a business with an HMRC Time to Pay arrangement.
The available amount depends on the lender's programme limits, the business's financial circumstances and the proposed use of funds.
A company with substantial revenue, strong profitability and a relatively modest remaining HMRC balance may have different financing options from a company whose tax arrears represent several months of turnover.
A lender may consider the amount outstanding, remaining instalments, cash flow available after existing obligations and the reason for seeking additional finance.
For example, a company generating £100,000 monthly in turnover does not automatically qualify for £50,000 simply because it is maintaining a £20,000 HMRC arrangement.
The lender must still determine whether the business can support the new facility.
Some lenders may require the HMRC arrears to be settled before funding. Others may consider an ongoing compliant arrangement, depending on their policies.
The business should clarify the acceptable structure before incurring application or professional fees.
How Lenders Assess Affordability With an HMRC Payment Plan
An HMRC instalment is a financial obligation that must be included in the company's cash-flow assessment.
A business may appear profitable before debt payments while having limited cash remaining after tax and finance commitments.
Example: UK Limited Company With an Active HMRC Arrangement
Consider a hypothetical company that has an approved HMRC Time to Pay arrangement and is seeking additional working capital.
Its average monthly cash generation after normal operating expenses, but before tax payments and financing commitments, is £12,000.
Its monthly obligations include:
HMRC Time to Pay instalment: £3,500, including the amount required under the agreed schedule.
Provision for new tax liabilities: £2,500.
Existing business loan payments: £1,000.
After these commitments, the business has approximately £5,000 in monthly cash available before any new financing.
Suppose it is offered a business loan requiring a further £3,000 per month.
After all these payments, approximately £2,000 would remain.
That may appear manageable, but the business should test a lower-revenue scenario.
What Happens if Cash Generation Falls by 20%?
A 20% reduction would lower the original £12,000 cash generation to £9,600.
Assuming the HMRC payment, tax provision and finance instalments remain unchanged, total monthly commitments would equal £10,000.
The company would therefore face an approximate £400 monthly cash shortfall before any additional unforeseen expense.
The proposed loan could be unaffordable even though the company is currently up to date with its HMRC arrangement.
This is why lenders assess projected cash flow, not merely past turnover or the existence of an approved tax repayment plan.
This example is hypothetical and does not represent an actual underwriting decision, lender offer or Mehmi Financial Group customer transaction.
Is It Better to Keep an HMRC Payment Plan or Take a Business Loan?
In some cases, maintaining an affordable Time to Pay arrangement may be financially preferable to replacing it with commercial borrowing.
HMRC normally charges late-payment interest on outstanding tax during the arrangement.
However, the cost of commercial financing may be higher once interest, arrangement fees, personal guarantees and repayment obligations are considered.
HMRC Time to Pay
An HMRC arrangement allows the outstanding tax balance to be paid in instalments.
Its main advantage may be that the business can address tax arrears without taking a separate commercial loan.
However, interest continues to accrue, the business must meet new tax liabilities and failure to comply can create significant consequences.
Commercial Business Loan
A business loan may be used to settle an HMRC balance where the lender expressly permits that purpose.
The business then repays the commercial lender under a separate agreement.
This may be appropriate where the structure genuinely improves cash flow or reduces the overall financing burden.
However, it does not make the underlying financial difficulty disappear.
The company has effectively replaced one liability with another.
Compare the Total Cost
HMRC's published late-payment interest schedule listed 7.75% from 9 January 2026 for the main applicable taxes. Rates can change, so the current rate should be checked when evaluating an actual arrangement.
A business considering refinancing its tax arrears should compare the remaining HMRC principal and interest with the full cost of the proposed commercial loan.
That comparison should include interest, fees, security, personal guarantees and the exact repayment dates.
Do not assume that a business loan is better simply because it clears the HMRC balance immediately.
Sources: HMRC Late Payment Interest Rates and HMRC — How Much You Will Pay.
Can a Business Loan Be Used to Clear HMRC Tax Arrears?
Potentially, where the lender permits tax debt repayment as a use of funds.
Certain commercial finance products are designed to help businesses finance VAT or Corporation Tax liabilities.
However, lending against an unpaid current tax bill is not necessarily treated the same as financing a debt that has been overdue for several months.
A lender may distinguish between an upcoming tax obligation, an agreed and current Time to Pay arrangement, and tax arrears already subject to enforcement.
The provider may also require confirmation of the amount due before releasing funds.
In some cases, a lender may require the HMRC debt to be cleared as part of the transaction.
Before applying, confirm that the proposed product permits the intended tax-related expenditure.
If the business is already operating under an HMRC arrangement, it should also consider whether settling that balance affects the terms of the agreement.
Does an HMRC Payment Plan Affect Your Business Credit Score?
An HMRC Time to Pay arrangement should not be confused with a County Court Judgment.
A Time to Pay arrangement is an agreement with HMRC to settle tax liabilities over time. It is not itself a court judgment.
However, this does not mean the arrangement is invisible to lenders or irrelevant to credit assessments.
Lenders may discover tax-related difficulties through business bank statements, financial accounts, applicant disclosures, credit information or public enforcement proceedings where applicable.
A company's financial position may also influence credit decisions independently of whether a particular tax arrangement appears as a separate entry on a commercial credit report.
Business owners should not assume that an active HMRC plan has no effect on borrowing eligibility.
Equally, it would be incorrect to claim that every Time to Pay arrangement automatically creates a CCJ or permanently damages a business credit score.
The impact depends on the relevant records, lender and circumstances.
Does the Type of HMRC Debt Affect Funding Approval?
Potentially.
VAT, PAYE, Corporation Tax and Self Assessment liabilities have different legal and operational characteristics.
A lender assessing a limited company with PAYE arrears may focus on whether current employee-related tax obligations are being met.
A company with Corporation Tax arrears may be assessed against historical profitability and current operating cash flow.
A sole trader with Self Assessment arrears may be evaluated through both personal and business finances.
Furthermore, certain HMRC liabilities receive secondary preferential status in qualifying insolvency proceedings, which can affect the position of other creditors.
No universal lending rule states that one category of HMRC debt always leads to approval and another always leads to rejection.
However, the type, amount, status and circumstances of the arrears can materially affect underwriting.
What Documents Do You Need for Business Funding With HMRC Arrears?
A business applying for finance while on an HMRC payment arrangement should prepare clear financial information.
The following documents may be relevant, depending on the provider:
- HMRC agreement: Confirmation of the Time to Pay arrangement, amount covered, instalments and remaining term.
- Payment history: Evidence that agreed HMRC payments have been made where required.
- Current tax position: Information on outstanding VAT, PAYE, Corporation Tax or other applicable liabilities.
- Business bank statements: Recent statements showing revenue, expenses and payment conduct.
- Financial accounts: Recent management accounts or annual financial statements.
- Cash-flow forecast: A realistic forecast showing how HMRC payments, new tax obligations and proposed financing would be met.
- Existing debt schedule: Details of loans, leases, merchant advances and other financial commitments.
- Funding purpose: The amount requested, intended use and supporting commercial information.
Some providers may require additional information about payment defaults, tax enforcement, ownership or security.
Sensitive tax reference numbers, bank statements and personal identification documents should only be submitted through an appropriate secure process.
How to Improve Your Chances of Getting Funding With an HMRC Payment Plan
Businesses cannot guarantee lender approval, but they can improve the quality of the information available for underwriting.
Maintain the Agreed HMRC Payments
Where possible, keep every scheduled payment up to date.
A consistent repayment record helps demonstrate compliance with the existing arrangement.
If the company expects difficulty making a payment, contact HMRC before the instalment is missed.
Keep Current Tax Liabilities Up to Date
HMRC requires businesses on Time to Pay to remain capable of meeting new liabilities as they arise.
A company that pays its historic arrears but accumulates new tax debt may be considered financially unstable.
This is also likely to concern potential lenders.
Prepare an Explanation of the Original Problem
A clear explanation can help distinguish a temporary cash-flow shortage from an ongoing financial issue.
For example, if an unusually large commercial customer invoice was paid late, document the payment delay and its resolution.
Avoid unsupported statements that the problem will not happen again.
Demonstrate Current Cash Generation
Recent bank statements, management accounts and a cash-flow forecast can help establish whether the business is generating enough cash to meet its commitments.
A positive accounting profit is useful, but the timing of actual cash receipts and payments also matters.
Reduce Unnecessary Financial Commitments
Where commercially appropriate, review non-essential expenses, inventory levels and existing financing costs.
However, avoid depleting the cash needed to pay HMRC or meet future tax obligations simply to improve an application.
Request the Correct Amount
A business needing £20,000 for a defined working-capital purpose does not necessarily benefit from accepting £60,000.
Larger facilities create additional interest, fees and repayment obligations.
Select a Suitable Financing Structure
A company with substantial unpaid commercial invoices may benefit from considering invoice finance.
A business purchasing machinery may find asset finance more suitable.
A business with strong card receipts may wish to compare merchant cash advances.
The appropriate structure should address the actual cash-flow requirement.
Can You Get a Merchant Cash Advance With an Active HMRC Payment Plan?
Potentially.
A merchant cash advance provider may focus on the volume and consistency of eligible debit and credit card transactions.
However, many providers also review business credit information, existing debt and financial commitments.
An active HMRC payment arrangement can therefore affect an MCA application.
Example: Restaurant With an HMRC Arrangement
Consider a hypothetical restaurant processing £40,000 monthly in qualifying card sales.
It has an agreed HMRC payment plan requiring £2,500 each month.
Suppose an MCA provider offers an advance with collections equal to 10% of eligible card receipts.
At the existing trading level, the MCA would collect approximately £4,000 per month.
The business would therefore need to accommodate approximately £6,500 in combined monthly HMRC and MCA payments before accounting for other financing.
That calculation does not include new tax liabilities, wages, rent, food purchases or other operating costs.
The restaurant must establish whether the combined obligations are affordable.
The fact that a provider can offer an MCA does not automatically mean the business should accept it.
What Happens if You Miss an HMRC Time to Pay Payment?
Missing an agreed HMRC instalment can have serious consequences.
HMRC may contact the business to establish why the payment was missed.
Depending on the circumstances, HMRC may consider whether the arrangement can be brought up to date or renegotiated.
However, HMRC can cancel arrangements where the conditions are not maintained.
An agreement that is cancelled can expose the business to renewed collection action.
For VAT, HMRC guidance also explains that cancellation may result in late-payment penalties being charged as if the Time to Pay arrangement had never existed.
What if Your Business Cannot Afford the Next Payment?
Contact HMRC promptly and explain the circumstances.
Prepare accurate information on cash flow, existing obligations and what the business can realistically pay.
Do not assume that an additional business loan will be available before the instalment deadline.
Where the business cannot meet HMRC payments or other debts as they fall due, qualified restructuring or insolvency advice may be necessary.
Source: HMRC — Conditions of Time to Pay.
Can an HMRC Payment Plan Lead to Insolvency?
An HMRC Time to Pay arrangement does not automatically mean a company is insolvent.
However, the circumstances that led to the arrangement may indicate financial distress.
If a limited company cannot pay debts as they become due, or its liabilities exceed its assets, insolvency considerations may arise.
Where insolvency becomes likely, directors must consider their duties towards creditors and avoid actions that worsen the company's financial position.
For example, taking a new expensive loan to continue trading without a realistic prospect of meeting its obligations may create additional risks.
HMRC may also take enforcement action if liabilities are not paid and an appropriate arrangement cannot be maintained.
Depending on the circumstances, creditor action can include a winding-up petition.
Businesses facing statutory demands, winding-up proceedings or continuing inability to pay debts should seek urgent advice from a qualified insolvency practitioner or solicitor.
Sources: GOV.UK — Director Duties Upon Insolvency and GOV.UK — What Happens if You Do Not Pay Your Tax Bill.
How to Apply for Business Funding While on an HMRC Payment Plan
Step 1: Confirm Your HMRC Arrangement
Identify the tax type, original balance, amount outstanding, monthly instalment and remaining term.
Confirm that the arrangement is active and that payments are up to date.
Step 2: Review Any New Tax Liabilities
Determine whether the company has additional tax bills outside the existing agreement.
Separate historic arrears from current and upcoming obligations.
Step 3: Calculate Available Cash Flow
Review operating revenue, costs, existing finance payments, HMRC instalments and provision for new taxes.
Determine how much cash the business can realistically allocate towards new borrowing.
Step 4: Identify the Funding Purpose
Clarify whether the funds are needed for working capital, supplier payments, equipment purchases or settlement of tax arrears.
A lender may apply different rules depending on how the money will be used.
Step 5: Identify Suitable Financing Structures
Compare relevant business loans, invoice finance, asset finance, merchant advances and other appropriate facilities.
Confirm whether each provider will consider applications involving an active HMRC arrangement.
Step 6: Prepare an Accurate Application
Provide the HMRC repayment information and other financial records requested.
Do not omit tax arrears or misrepresent a payment arrangement as fully settled.
Step 7: Compare the Complete Offers
Review interest, fees, repayments, security, personal guarantees and the total amount payable.
If the facility will replace the HMRC arrangement, compare the new total cost with the remaining cost of Time to Pay.
Step 8: Complete Underwriting and Review the Contract
A lender may request further verification, review existing creditor obligations or require particular conditions to be satisfied before funding.
An initial eligibility indication is not a guaranteed offer.
Do not make commitments based on an assumed approval or funding date.
Frequently Asked Questions About Business Funding With an HMRC Payment Plan
Can I Get a Business Loan if I Have an HMRC Time to Pay Arrangement?
Potentially. Some finance providers may consider established businesses with active HMRC arrangements. Approval depends on lender policy, payment history, financial performance and affordability.
Will an HMRC Payment Plan Automatically Cause a Loan Decline?
No universal rule requires every lender to reject an applicant with a Time to Pay arrangement. However, individual lenders may apply restrictions or decline because of the tax arrears.
Is It Easier to Get Funding if My HMRC Payments Are Up to Date?
Maintaining the agreed payments can demonstrate better recent payment conduct, but approval still depends on the lender's full underwriting assessment.
Can I Get Business Funding With VAT Arrears?
Potentially, depending on the amount outstanding, whether an HMRC arrangement exists and whether the business can support further financing.
Can I Get a Business Loan With PAYE Arrears?
Possibly, but continuing PAYE arrears may raise significant affordability and compliance concerns. Providers may require further financial information or decline the application.
Can I Get Funding With Corporation Tax Arrears?
Potentially. A lender may review the reason for the Corporation Tax debt, the repayment arrangement and the company's current financial position.
Can I Get a Merchant Cash Advance While on Time to Pay?
Possibly, subject to the provider's policy and the business's qualifying card sales. The MCA collections must remain affordable alongside the existing HMRC instalments.
Can I Get Funding With £20,000 in HMRC Arrears?
There is no universal approval threshold based on the arrears amount. A lender will consider revenue, profitability, cash flow, existing obligations and the status of the tax debt.
What if My Business Owes £50,000 or More to HMRC?
Larger arrears may require more detailed financial assessment. The business may need to consider whether additional borrowing is appropriate and whether specialist restructuring advice is necessary.
Can I Get a Business Loan to Pay HMRC Directly?
Some commercial finance products permit tax-related expenditure or clearing existing HMRC liabilities. However, the lender must confirm that the purpose is eligible.
Is an HMRC Payment Plan Better Than Taking a Loan?
It can be. Time to Pay may have a lower overall cost than certain commercial borrowing arrangements. Compare the remaining HMRC interest and instalments with the complete cost and obligations of a proposed loan.
Does HMRC Charge Interest During a Payment Plan?
Generally, yes. Applicable late-payment interest continues on outstanding tax amounts until they are settled.
Can HMRC Cancel a Time to Pay Arrangement?
Yes. HMRC may cancel the arrangement if the conditions are not maintained. The consequences can include further collection action and applicable penalties.
Can HMRC Extend My Payment Plan?
HMRC may consider changes where circumstances justify them. However, longer periods are not guaranteed, and business arrangements beyond 12 months are exceptional under its internal guidance.
Can I Get Finance if I Missed an HMRC Instalment?
Possibly, but missed instalments may materially weaken the application. The business should contact HMRC and establish the current status of its arrangement.
Does an HMRC Payment Plan Show as a CCJ?
No. An HMRC Time to Pay arrangement is not itself a County Court Judgment. However, tax arrears and related financial information can still affect lending decisions.
Can I Get a Business Loan With Both CCJs and HMRC Arrears?
Potentially, but the combination creates additional underwriting concerns. Lenders may review the judgment status, HMRC obligations and the business's overall financial condition.
Can a Sole Trader Apply for Business Funding With a Self Assessment Payment Plan?
Some providers may consider sole traders, but eligibility depends on the product and the individual's financial circumstances. Personal tax liabilities may be directly relevant.
Does HMRC Time to Pay Stop Enforcement Action?
Maintaining an agreed arrangement may prevent certain recovery or security actions concerning the covered liabilities. However, protection is conditional and should not be assumed to cover other debts or breaches of the arrangement.
Can My Business Get Funding During HMRC Enforcement Proceedings?
Active enforcement can significantly restrict financing options. Seek qualified legal, tax or insolvency advice promptly rather than relying on an uncertain funding application.
What Documents Prove My HMRC Plan Is Up to Date?
A lender may request the agreement confirmation, current HMRC balance information and evidence of recent instalment payments.
How Quickly Can I Get Business Funding With an HMRC Payment Plan?
There is no guaranteed timeframe. Additional verification of tax arrears, financial records and existing obligations may be required before an offer is approved.
Final Thoughts: Can Your Business Qualify for Funding With an HMRC Payment Plan?
An active HMRC Time to Pay arrangement does not automatically eliminate every business financing option in the United Kingdom.
However, it is a significant financial obligation that lenders may consider when evaluating an application.
A business maintaining its tax instalments, paying new liabilities as they fall due and generating sufficient operating cash may have a stronger financing profile than one accumulating new tax debt or missing existing payments.
Potential options include specialist business loans, merchant cash advances, invoice finance, secured facilities and asset-backed financing.
The appropriate solution depends on the actual funding requirement, assets, receivables, credit position and ability to service the proposed debt.
Before proceeding, compare the cost of any new financing with the remaining cost of the HMRC arrangement.
A business should not replace an affordable tax payment plan with more expensive financing without a clear financial benefit.
The most important question is not simply whether you can borrow while on an HMRC payment plan. It is whether the new funding will improve your business's financial position without jeopardising its existing obligations.
Explore Business Funding Options With Mehmi Financial Group
Does your UK business have an active HMRC Time to Pay arrangement but still need working capital, supplier financing, equipment funding or another commercial finance solution?
Mehmi Financial Group is an independent commercial financing brokerage helping businesses evaluate funding requirements and explore potential third-party financing options.
UK financing enquiries and referrals are subject to applicable local legal and regulatory requirements, participating provider availability and confirmation that an appropriate service can be offered.
Discuss Your Business Funding Requirements
To begin a preliminary review, tell us your business's UK location, industry and trading history.
It is also helpful to provide your approximate monthly turnover, financing amount requested, intended use of funds and whether your HMRC Time to Pay arrangement is active and up to date.
Our team can review the initial information and explain whether an appropriate financing or referral route may be available.
Explore Your Business Funding Options — Contact Mehmi Financial Group
Begin with general business information only. Do not provide HMRC reference numbers, detailed tax account information, bank statements or personal identification through an unsecured enquiry form. Additional records should be supplied through a suitable secure process if requested.
Mehmi Financial Group is not HMRC, a tax adviser or a direct lender. We do not negotiate or approve HMRC Time to Pay arrangements. Any UK financing or referral service is subject to applicable requirements and provider availability.
Financing is supplied by independent third parties and remains subject to lender underwriting, affordability, contractual terms and applicable regulatory requirements. Brokerage or referral compensation may apply and should be disclosed where relevant. No approval, funding amount, rate or completion date is guaranteed.
This article is for general commercial finance education and does not constitute financial, legal, tax or insolvency advice. Businesses experiencing difficulty meeting tax or other creditor obligations should seek qualified professional advice. All business and financial examples are illustrative.
About the Author
Jodhbir Mehmi — Commercial Finance Specialist, Mehmi Financial Group
Jodhbir Mehmi has experience in commercial financing, equipment finance, working-capital funding and underwriting preparation.
His work includes helping business owners evaluate financing structures, prepare lender documentation and assess the impact of financing obligations on commercial cash flow.
Sources and Further Reading
This article draws on HMRC's official Time to Pay guidance, its internal principles for business payment arrangements and guidance on the conditions of Time to Pay.
For tax costs and enforcement, see HMRC late-payment interest rates, VAT late-payment penalties and what happens if you do not pay your tax bill.
For financing alternatives, see the British Business Bank's working-capital finance guide. For insolvency considerations, see HMRC as a preferential creditor and directors' duties upon insolvency.