HMRC DEBT
HMRC arrears becoming difficult to control?
If VAT, PAYE or Corporation Tax is falling behind, the important question is not simply how much the company owes — it is whether the business can realistically deal with the arrears and keep future tax liabilities up to date.
Company Debtline provides free, confidential guidance to help you understand the position, the options that may still be available and what the situation could mean for you personally.
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HMRC debt — what directors should understand.
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Prefer to choose a time? Book a call.HMRC arrears are often a sign that the wider financial position needs attention.
For many companies, tax arrears do not begin with one major event. A VAT payment is delayed to meet wages. PAYE is pushed back while waiting for a customer to pay. Corporation Tax becomes due when the cash that was expected to cover it is no longer available.
One missed payment can then become several outstanding liabilities.
The important question is whether the company is dealing with a temporary cashflow shortage or whether it is becoming increasingly dependent on delaying HMRC and other creditors simply to continue trading.
The amount already owed matters. But the company’s ability to meet its next VAT, PAYE or Corporation Tax liability can be just as important.
HMRC PRESSURE
When tax arrears become something more serious.
Being late with one tax payment does not necessarily mean the company is insolvent. The concern increases when HMRC arrears form part of a wider pattern of financial pressure.
- Several VAT, PAYE or Corporation Tax payments are now outstanding
- The HMRC balance continues to increase rather than reduce
- The company cannot clear the arrears without falling behind somewhere else
- A Time to Pay arrangement has been missed, cancelled or is becoming unaffordable
- New tax liabilities are becoming due before older liabilities have been cleared
- Directors are putting personal money into the company to meet operating costs
- HMRC contact has progressed beyond routine reminders
- You are relying on future customer payments to meet liabilities that are already overdue
Several of these issues appearing together can indicate that the problem is no longer simply an HMRC debt — it may be a wider company cashflow or solvency issue.
Before speaking to HMRC, understand what the company can realistically afford.
A payment arrangement is only useful if the company can actually maintain it. Before agreeing to anything, it helps to understand the complete financial position.
- Total HMRC arrears — What is currently outstanding across VAT, PAYE, Corporation Tax and any other liabilities?
- Ongoing tax — What further liabilities will fall due over the coming weeks and months?
- Available cashflow — After wages and essential operating costs, what can the company realistically afford to pay towards the arrears?
- Other creditors — What else is overdue, and is pressure also increasing from suppliers, lenders or other creditors?
- Money and assets available — Are customers withholding significant payments? Does the company have assets or other funds that could improve the position?
- Underlying viability — If the HMRC arrears could be stabilised, would the underlying business generate enough cash to remain viable?
These questions help determine whether HMRC arrears may be manageable through an affordable arrangement — or whether the company needs to consider the wider financial position.
What options may still be available?
The appropriate next step depends on the size of the arrears, the company’s current cashflow, the stage HMRC has reached and whether the underlying business remains viable.
TIME TO PAY
HMRC may agree for an overdue tax liability to be repaid by instalments where the company cannot pay immediately but can afford an arrangement. The company will normally need to demonstrate that the proposed payments are affordable and that ongoing tax liabilities can also be dealt with.
IMPROVE CASHFLOW
If customers owe the company money, accelerating recovery of those debts may improve the company’s ability to deal with HMRC and other creditors. Additional working capital, cost reductions or changes to the way the business operates may also be relevant where the underlying company remains viable.
RESTRUCTURE THE POSITION
Where the financial pressure extends beyond HMRC, looking at the company as a whole may identify whether liabilities, costs, finance or operations need to be restructured.
FORMAL INSOLVENCY ADVICE
If the company cannot realistically meet its liabilities, or HMRC action has reached an advanced stage, advice from a licensed insolvency practitioner may be necessary to understand the formal options available.
The questions directors usually want answered first.
When HMRC arrears are increasing, directors generally want to know how much time they have, whether an arrangement is possible and what happens if the company simply cannot pay.
Can HMRC give my company more time to pay?
Potentially. HMRC may agree a Time to Pay arrangement where the company cannot pay the liability immediately but can afford an agreed repayment plan. It is not automatic and the circumstances of the company will be considered.
How long can a Time to Pay arrangement last?
There is no universal term that applies to every case. HMRC arrangements are based on affordability and circumstances, and arrangements will generally be expected to be as short as reasonably possible.
What if the company cannot keep up with a Time to Pay arrangement?
Do not simply ignore a missed payment. If the company’s circumstances change, HMRC should be contacted promptly. Whether an arrangement can be changed or renegotiated will depend on the circumstances.
Can HMRC wind up my company?
Yes. If company tax remains unpaid and no satisfactory resolution is reached, HMRC can ultimately seek to close the company through the courts. A winding-up petition is a formal insolvency process and should be treated as urgent.
Am I personally responsible for the company’s HMRC debt?
Company tax liabilities normally belong to the limited company. However, the company’s financial difficulties may raise separate issues affecting directors personally, including Director’s Loan Accounts, personal guarantees and transactions undertaken before insolvency.
Should I simply pay HMRC before everybody else?
Where a company may be insolvent, directors need to consider the company’s overall financial position and their duties to creditors. Making individual payments without understanding that wider position may not address the underlying problem.
What happens when you speak to Company Debtline?
- 01
TALK
Tell us what is happening
Explain what the company owes HMRC, which taxes are outstanding, what HMRC has said and whether other creditors are also applying pressure.
- 02
UNDERSTAND
We look at the wider position
We help you consider the arrears alongside current cashflow, upcoming liabilities, other creditors, company assets and the underlying viability of the business.
- 03
GET CLARITY
Understand how serious the position may be
We explain the key issues in plain English, including whether the problem appears potentially manageable or whether more urgent specialist advice may be appropriate.
- 04
NEXT STEPS
Know what to do next
Where appropriate, we can help you understand the practical options available and when you should speak to HMRC, a licensed insolvency practitioner or another specialist professional.
Free and confidential guidance for directors of UK limited companies.
Not ready to speak to someone?
You can start with our Free Company Debt Assessment. Answer a few questions about the company’s financial position, creditor pressure and your circumstances to identify the areas that may need closer attention.
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Frequently asked questions
Is HMRC debt a sign that my company is insolvent?
Not necessarily. A company can experience temporary cashflow difficulties without being insolvent. The relevant questions include whether liabilities can be paid as they fall due, the value of the company’s assets and whether the underlying business remains viable.
Can I speak to HMRC before the tax becomes overdue?
Potentially. If it is already clear that the company will be unable to pay a liability by the due date, it can be sensible to contact HMRC early rather than wait for the debt to become overdue.
Will HMRC agree to every Time to Pay request?
No. An arrangement is discretionary and HMRC will consider the company’s circumstances and ability to pay.
What information will HMRC want?
For business tax debts, HMRC may ask for information about the company’s income and expenditure, assets, liabilities and its ability to make the proposed payments.
What if HMRC has threatened a winding-up petition?
That materially increases the urgency. A winding-up petition is formal court action seeking compulsory liquidation of the company and specialist advice should normally be obtained promptly.
Can Company Debtline speak to me even if I do not yet know exactly what the company owes?
Yes. Exact figures are useful, but you can start by explaining what you know about the arrears, current cashflow, HMRC contact and any other creditor pressure.
Understand the position before HMRC pressure increases.
You do not need to know the solution before you speak to us.
If VAT, PAYE or Corporation Tax arrears are becoming difficult to manage, Company Debtline can help you understand the wider financial position, what options may still be available and any issues that could affect you personally as a director.
Free · Confidential · Practical guidance