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When structured with a secondary subject, i.e. [subject] would rather [secondary subject] [predicate]. It is always correct to use past tense.

-Cambridge University Press

-speakspeak

Therefore, of your two examples:

  • I would rather he played with Tim. is the correct form.

is the correct form.

When structured with a secondary subject, i.e. [subject] would rather [secondary subject] [predicate]. It is always correct to use past tense.

-Cambridge University Press

-speakspeak

Therefore, of your two examples:

  • I would rather he played with Tim. is the correct form.

When structured with a secondary subject, i.e. [subject] would rather [secondary subject] [predicate]. It is always correct to use past tense.

-Cambridge University Press

-speakspeak

Therefore, of your two examples:

  • I would rather he played with Tim.

is the correct form.

My original answer was based on an (incorrect) reading of the first link I'm now providing. Upon better inspection, I have corrected my answer. Thank you @Edwin Ashworth for the constructive criticism; I'll be far more careful in the future!; added 2 characters in body; added 1 character in body; added 6 characters in body; edited body; deleted 6 characters in body; added 97 characters in body
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Both are correctWhen structured with a secondary subject, however they impart minutely different meaningsi.

The former:

I would rather he played with Tim.

implies that the event has happened in the paste. "He" has played[subject] would rather [secondary subject] [predicate] with Tim in the past, and the speaker has an attitude toward that. It is always correct to use past eventtense.

The latter:-Cambridge University Press

I would rather he play with Tim.

-speakspeak

implies that the event is happening in the present. "He" is playing with Tim in the presentTherefore, and the speaker has an attitude toward that present event.of your two examples:

  • I would rather he played with Tim. is the correct form.

Both are correct, however they impart minutely different meanings.

The former:

I would rather he played with Tim.

implies that the event has happened in the past. "He" has played with Tim in the past, and the speaker has an attitude toward that past event.

The latter:

I would rather he play with Tim.

implies that the event is happening in the present. "He" is playing with Tim in the present, and the speaker has an attitude toward that present event.

When structured with a secondary subject, i.e. [subject] would rather [secondary subject] [predicate]. It is always correct to use past tense.

-Cambridge University Press

-speakspeak

Therefore, of your two examples:

  • I would rather he played with Tim. is the correct form.
Source Link

Both are correct, however they impart minutely different meanings.

The former:

I would rather he played with Tim.

implies that the event has happened in the past. "He" has played with Tim in the past, and the speaker has an attitude toward that past event.

The latter:

I would rather he play with Tim.

implies that the event is happening in the present. "He" is playing with Tim in the present, and the speaker has an attitude toward that present event.