Can HMRC Liquidate My Company?
Yes. HMRC can take legal action which may ultimately result in an insolvent company being wound up through the courts if tax debts remain unpaid.
However, HMRC does not automatically liquidate a company because it has missed a tax payment. There is normally an escalation of debt recovery action before a company reaches the point of compulsory liquidation.
If HMRC is threatening legal action against your company, acting quickly is important.
Worried HMRC could liquidate your company?
Speak confidentially to a Licensed Insolvency Practitioner at Umbrella.UK Insolvency about the position and the options that may still be available.
Why would HMRC try to wind up a company?
ThHMRC is a major creditor of UK businesses and may take enforcement action where companies fail to pay taxes such as:
- VAT
- PAYE
- National Insurance contributions
- Corporation Tax
The risk becomes more serious when debts remain unpaid, agreed payments are missed or HMRC believes the company cannot or will not pay what it owes.
How can HMRC force a company into liquidation?
Where a company owes HMRC money and the matter cannot be resolved, HMRC may ultimately petition the court to wind up the company.
If a winding-up order is subsequently made, the company enters compulsory liquidation.
This is different from directors choosing to place an insolvent company into a Creditors’ Voluntary Liquidation (CVL).
What is an HMRC winding-up petition?
A winding-up petition is a formal application asking the court to wind up a company because it cannot pay its debts.
It is a serious stage of HMRC enforcement.
Once a petition has been presented, directors should seek professional advice immediately. There can be significant consequences for the company and restrictions surrounding how its assets and bank accounts are dealt with.
Can I stop HMRC liquidating my company?
Whether compulsory liquidation can be avoided will depend on the company’s circumstances and how far HMRC’s action has progressed.
Possible routes in appropriate cases might include resolving the debt with HMRC or considering a formal insolvency or restructuring procedure.
There is no single solution and directors should not assume that simply offering a payment plan will stop formal proceedings once they have reached an advanced stage.
This is why early professional advice is particularly important.
What if the business is still viable?
HMRC debt does not necessarily mean the underlying business has failed.
If the company has a viable future but is experiencing serious cash flow problems, potential options may include:
HMRC Time to Pay
A Time to Pay arrangement may be possible where the company can realistically clear its arrears while keeping future liabilities up to date.
Company Voluntary Arrangement (CVA)
A CVA may enable a viable company to restructure its debts through a formal agreement with creditors.
Administration
In certain circumstances, Administration may provide protection while a restructuring, rescue or sale is pursued, provided a statutory purpose can be achieved.
The right option depends on the company’s financial position and the stage HMRC has reached.
What if my company cannot be rescued?
If the company is insolvent and there is no realistic prospect of recovery, directors may need to consider bringing the business to an orderly close.
A Creditors’ Voluntary Liquidation allows the directors and shareholders to initiate the liquidation process rather than waiting for a creditor such as HMRC to pursue compulsory liquidation.
Should I wait to see what HMRC does?
Waiting for HMRC to take the next step can significantly reduce the time available to consider alternatives.
If you already know that your company cannot pay its HMRC debt, seeking advice before enforcement reaches the winding-up stage can provide more opportunity to assess the business and consider the available options.
Get advice about HMRC debt and company insolvency
If HMRC is pursuing your company for unpaid tax, Umbrella.UK Insolvency can help you understand the seriousness of the situation and what options remain available.
Our Licensed Insolvency Practitioners provide confidential advice to company directors across England and Wales.
HMRC threatening action against your company?
The sooner you seek advice, the more time there may be to consider your options.
