A Company Voluntary Arrangement (CVA) and a Time to Pay (TTP) arrangement with HMRC are both mechanisms to help a business manage debt, but they differ significantly in scope, formality, and impact.

A CVA is a formal insolvency procedure that allows a company to reach a binding agreement with its unsecured creditors to repay a portion of its debts over a set period, usually three to five years. It provides legal protection, meaning creditors cannot take enforcement action while the arrangement is in place. This can give a business breathing space to stabilise cash flow and continue trading under the existing management.

A CVA can also result in some debt being written off at the end of the arrangement, reducing the overall burden on the company. However, the process is complex and requires the involvement of a licensed insolvency practitioner, making it more expensive and time-consuming to set up. It also needs the approval of at least 75% (by value) of voting creditors, so if HMRC is a major creditor, their agreement is often decisive.

Another drawback is that a CVA is recorded at Companies House, making it public and potentially damaging to the company’s reputation and credit rating. Strict compliance is required once it is in place, missing payments can cause the CVA to fail and creditors to take immediate action.

Time to Pay arrangement

By contrast, a Time to Pay arrangement is an informal agreement made directly with HMRC, allowing a company to spread its tax arrears (such as VAT, PAYE, or corporation tax) over a short period, usually up to twelve months. It is much quicker to arrange and does not involve a formal insolvency process or public disclosure. This can preserve the company’s credit rating and reputation, while demonstrating cooperation with HMRC.

However, a TTP only covers HMRC debts and provides no protection from other creditors, so it does not address wider financial distress. It is also intended as a short-term measure for businesses that are temporarily cash-flow constrained but otherwise viable. HMRC expects full adherence to the agreed payments, and missing even one instalment can lead to default and enforcement action.

In summary, a CVA is a formal, comprehensive restructuring tool suited to companies facing significant debt problems involving multiple creditors, whereas a Time to Pay arrangement is a limited, short-term option focused solely on HMRC arrears. The CVA offers legal protection and potential debt reduction but comes with higher costs and greater scrutiny, while the TTP is simpler, faster, and private, but less protective and less flexible for severe financial distress.

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