What are my options if I can’t pay my business' HMRC tax bill?

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  • Negotiate a bespoke arrangement with HMRC.
  • Protect you from creditor action.


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    Can’t pay my HMRC bill

    If your business can’t pay its HMRC bill, it can have a detrimental effect on that business. HMRC take late payments seriously and may investigate why you’re late or unable to pay your tax bills. It can imply something is fundamentally wrong with a business, and if left unaddressed, it could lead to the business closing.

    Once HMRC has established your company cannot pay its outstanding balance on time, they will consider whether your business is viable. For limited companies, this can sometimes lead to insolvency, and for sole traders, bankruptcy.

    What HMRC bill can’t you pay?

    Getting into debt with HMRC is a common problem, and a business could be hit with different tax bills at different times.

    • VAT arrears
      HMRC take non-payment of Value Added Tax (VAT) very seriously. Failing to pay HMRC VAT returns on time can leave you open to receiving a surcharge. These only increase debt burdens. Large arrears are a clear indicator of cash flow problems and sometimes insolvency, and HMRC may dig further into the company’s tax affairs. A lot of businesses have trouble with VAT, especially those around the VAT threshold.
      Help if you can’t repay your VAT bill
    • NI/PAYE
      If you’re having trouble paying Pay As You Earn (PAYE) and National Insurance (NI) on time, then the tax penalty regime can make the situation much worse, putting your business into further trouble. PAYE penalty amounts increase over a tax year, depending on the number of defaults. HMRC will charge interest on overdue amounts from the due date to the date the business eventually pays.
      Help if you can’t repay your PAYE

    What happens if I can’t pay my HMRC bill?

    If you don’t pay your HMRC bill, it can lead to severe issues, and HMRC will take every action possible to make sure your debts to them are repaid. First, you’ll receive reminders and warning letters. You should take these letters seriously; HMRC is responsible for winding up more companies and bankrupting more individuals than any other creditor.

    More on creditor pressure

    Should you ignore these reminders, HMRC will then send a county court summons. If you can’t contest the debt, it will be proven in court, and if the business can no longer pay the debt, it’s a clear indication that the company is insolvent. A business needs to respond within 14 days to a county court summons before potentially receiving a County Court Judgement (CCJ).

    If it comes to a CCJ, the business is in a precarious position as HMRC has proved by law that the debt exists, which can negatively affect its credit rating. HMRC can then proceed to wind up the business and issue a winding-up petition.

    For a limited company director, trading if the company is in an insolvent situation could result in personal liability for the company’s debts.

    What can happen if HMRC wants to wind up your company
    Can't pay my HMRC bill

    What are my options?

    If you find you’re behind on payments or can’t repay your business’ HMRC tax bill, there are options available to you. If you’re unsure of the best way to move forward, contact us for free, impartial, non-obligatory advice. We have years of experience negotiating with HMRC and helping businesses repay their tax arrears. We can advise you on the best possible solution for your circumstances and the most efficient way to negotiate with the tax office.

    • Negotiate an informal repayment arrangement
      A Time to Pay Arrangement (TTP) is an agreed, informal arrangement with HMRC, which allows a business to repay its tax bill over a period of time. Before the business is granted a TTP, it must first demonstrate it can maintain the repayments. Repayment periods may vary but can last between three, six, and occasionally 12 months.
      We have a huge amount of experience in making deals with HMRC; we speak with them every day and can negotiate an arrangement on your behalf. With our help, you can get the most efficient deal that works for both parties.
      More information about Time to Pay Arrangements

    If you have debts to parties other than HMRC, or you’ve previously had a Time to Pay Arrangement fail or be refused, there are other debt-relief options available.

    • Formal repayment arrangements
      For company directors who feel their business could be genuinely profitable, a Company Voluntary Arrangement (CVA) could be a viable option. CVAs involve paying a company’s creditors an affordable portion of their debt monthly, and the company can continue trading for the duration. With our expertise, we can help you negotiate the best way to repay HMRC and other creditors through a CVA.
      Read more about Company Voluntary Arrangements
      Although HMRC are now preferential creditors, their debts can still be included in a Company Voluntary Arrangement if they approve it.
    • Closing via a liquidation
      If your company is suffering from unbearable creditor pressure and there’s little chance of repaying your debts, it might be time to think about closing the company via a Creditors Voluntary Liquidation (CVL). We can offer you expert advice to help guide you down the best path for your business.
      In some circumstances, the directors may be able to reacquire company assets at market value to form a new company.
      Read more about Creditors Voluntary Liquidation
    • Repaying for individuals and sole traders
      For sole traders and individuals who can’t pay their HMRC bill or are struggling with creditor pressure, an IVA could help relieve those debts. Like with a CVA, an IVA can help you repay what you can afford, usually over five years. Sole traders can continue trading, and it can be a viable option for individuals looking to avoid bankruptcy. We can help give you expert advice on coming to the best possible arrangement with creditors for manageable repayment terms.
      Read more about Individual Voluntary Arrangements

    In summary

    Keeping up with your HMRC tax bill can be difficult, and should you fall behind on the repayments, the tax office will do everything they can to get their money back. Sometimes, a hefty unpaid tax bill can indicate bigger problems within a business, so it’s important to tackle the issue head-on and not bury your head in the sand; otherwise, the problems could worsen. You can apply for an informal repayment arrangement with HMRC to repay your tax bill, and HMRC debt can be included in more formal arrangements for limited companies, sole traders, and individuals.


    Can HMRC send bailiffs if I can’t pay my HMRC bill?

    If you ignore reminders to pay your HMRC bill, they can send bailiffs or High Court Enforcement Officers (HCEOs) to collect items equal to the debt’s value, which will then be sold to recover the amount. If the debt relates to a company, the bailiffs should only visit its registered address. While HCEOs can seize business items, they cannot take anything on lease or hire purchase or items essential to keep the business running.

    More on bailiff powers

    If I can’t pay my HMRC bill, can I be held personally liable for my company’s debts?

    Under normal circumstances, a limited company and its director are separate entities, and the limited company’s debts won’t affect the director’s personal finances and vice versa. However, there can be circumstances wherein a director may have acted unlawfully before or during the insolvency, have personal guarantees or an overdrawn Directors Loan Account (DLA). In which case, the director can be held personally liable.

    More on personal liability for company debt

    Does HMRC have distraint powers?

    HMRC do have the power to serve a ‘distraint order notice’ which can be used to seize business assets or stock. They won’t take items that stop the business from working or ‘tools of the trade’, but any assets or stock deemed redundant could be taken. After receiving a distraint order notice, there are typically five days before HMRC come to collect goods. If you are the director of a limited company, bailiffs cannot collect personal items. Sole traders, however, are personally liable for their business debt, so they could have their personal assets collected.
    The worst potential result for a company would be the serving of a winding-up petition. For a sole trader, the worst-case scenario would see them forced into bankruptcy.

    More on HMRC’s powers of distraint

    Can I repay other creditors before HMRC?

    With the threat of HMRC winding up your company, it may be tempting to repay their outstanding amount before any of your other creditors. However, if your company is insolvent, you shouldn’t pay anyone directly without speaking to a licensed insolvency practitioner. There is a payment hierarchy that should be adhered to. Deviating from this hierarchy can lead to accusations of creditor preference. HMRC is a preferential creditor and second in the payment hierarchy.

    More on the payment hierarchy

    Beverley Horton Christopher Callaghan Stephen Hall

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