Both versions are correct, but my opinion on this is to emphasize on the tense. 1. It is time we leave - as in asking everybody to stop their work and leave the office immediate after. 2. It is time we left - as in it is past the time that we usually leave office and hence implying we should leave soon.

Many thanks! It helps a lot!

Sometimes also , we say ,"its time we went , or its time we were going. Basically it means " lets go" "lets get out of here" Its probably in the the past tense as we feel we should have done it a while ago. People often say this if they are late or pushed for time or if its a late night and its time to go. I am learning Spanish and these things come up all the time. All the fun of learning a language I suppose. Hope this helps.