My limited company can’t pay its HMRC VAT bill. What are my options?
If your company cannot repay its VAT bill, you can explore setting up a Time to Pay Arrangement (TTP) to help repay outstanding debts to HM Revenue & Customs (HMRC).
A TTP must be agreed with HMRC, who will assess whether it would be affordable and realistic for your company. The process is usually only suitable when your company has a viable business model, it can afford its ongoing liabilities, the arrangement’s instalments, and the accrued interest. If the company has other financial difficulties or continuing to trade isn’t viable, formal recovery or liquidation arrangements may be more appropriate.
Taking advice as soon as you become aware of your company’s potential financial challenges will help clarify whether a TTP would be a realistic solution. Speak to us for free, impartial, confidential insolvency advice with no obligation.
More about Time to Pay ArrangementsIs the problem temporary, or is the company insolve
The company’s inability to repay an outstanding VAT bill could be due to a temporary problem affecting its cash flow, which the company may be able to recover from without entering a formal process.
While one missed VAT payment doesn’t necessarily mean that your company is insolvent, it’s important to stay aware of, and monitor the situation. If the VAT bill is one of multiple debts that the company can’t repay, it could indicate the company has deeper-rooted financial issues, which could mean it is already insolvent.
To help identify whether the company’s inability to pay is because of a one-off shortfall or deeper-rooted problems, consider the following:
- Are payments overdue to other creditors?
- Can the company cover wages, rent, finance, or future tax liabilities?
- Do cash-flow forecasts suggest recovery is possible?
- Do the company’s liabilities exceed its assets?
What happens if my limited company doesn’t pay its VAT bill?
If your company’s VAT bill isn’t paid on time, HMRC can begin the process to recover the debt. This could lead to your company paying interest on the late payments, possible additional penalties, and enforcement action. If the situation remains unresolved or you ignore it, HMRC could issue a winding-up petition, potentially forcing the company into compulsory liquidation.
Can I be held personally liable for my limited company’s VAT bill?
Usually, no. VAT belongs to your company, and it is the company’s responsibility to repay. As a director, you are protected by limited liability protection, separating your personal finances from your company in most circumstances.
Taking advice early can help directors understand their duties and address any potential concerns.
More on personal liability for company debtsHow our services can help your company
If your company is facing financial difficulties, including an unaffordable, outstanding VAT bill, a formal insolvency procedure may be the most appropriate option to deal with the situation. Which one is most suitable will depend on your company’s circumstances. We can advise whether a TTP would be a suitable solution or if a formal insolvency process would be more appropriate.
- Repay your company debts in a payment plan via a Company Voluntary Arrangement (CVA)
A CVA is a payment plan between a company and its creditors that allows you to restructure your company’s unsecured debts, while continuing to trade, by making affordable monthly payments over a fixed period. We start by assessing your company’s financial position, determining a realistic repayment amount. These terms are then proposed to your creditors and, if approved, your company enters the repayment plan. When in place, all interest and charges are dropped and creditors in the arrangement cannot take further legal action. The process lasts for up to 5 years and on successful completion, any remaining unsecured debt in the arrangement is written off.
- Restructure your company through administration
Administration is an insolvency procedure for companies. Entering the procedure, your company will be in a temporary state of protection by a moratorium that halts creditor action, including legal proceedings, giving your company the breathing space to continue trading. We will act as administrator and our primary purpose is to rescue your company as a going concern, attempting to restructure and turn it into a leaner, more profitable organisation. If rescuing the company isn’t a viable option, we will also look at the most appropriate exit strategies from administration, whether that be a potential sale of the business, assets, the whole company, or transitioning to an alternative insolvency procedure.
- Close your company down via a Creditors' Voluntary Liquidation (CVL)
A CVL is a liquidation procedure for companies that are insolvent. The process will formally close and liquidate your company, ceasing its trading operations, realising any assets, and removing the threat of creditor legal action. If your company has employees, they can claim for redundancy and other statutory entitlements through the government’s Redundancy Payments Service (RPS). The process is final and irreversible. Once completed, your company’s unsecured debt will be written off and the company is dissolved, allowing you, the director, to move on.
- Close your company down and start again via a pre-pack liquidation
A pre-pack liquidation is a type of CVL where the sale of your company’s assets is arranged before liquidation, allowing business operations to continue seamlessly under the purchasing company. The company name may be reused, and employees can transfer under TUPE. Contracts and essential agreements can also be included as part of a sale, ensuring minimal disruption to your business operations. This process eliminates the unsecured debts of your previous company, providing a fresh start free from previous unsecured liabilities.
How to get in touch with us: The next steps
- Speak with our initial advisers
Make contact with our team via phone, filling in a form, or online chat. We will assess your circumstances and, if suitable, arrange a free consultation with a consultant to discuss your company’s situation. - Initial assessment
During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or whether alternative solutions better suit your company’s problems. - Formally engage with Wilson Field
If there is an appropriate insolvency solution, we will confirm the necessary steps to start the procedure and will issue you with the relevant documentation for you to formally engage us.
In summary
If your company is unable to pay an outstanding VAT bill, you could explore setting up a TTP with HMRC to manage those debts and potentially reduce the risk of penalties. Repaying HMRC may be suitable if the company has experienced a temporary shortfall. A CVA may be a more appropriate option if the company has a viable business model, or administration if the company would benefit from protection from creditor pressure. Liquidation may be appropriate if recovery isn’t feasible.
Speak to us if you’re struggling to repay your company’s VAT bill, or if it’s one of several financial challenges that the company is facing. Our team can provide free, impartial, confidential advice with no obligation, and point you in the direction best for you and your company.
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