Company Cannot Pay HMRC – What Should I Do?
If your company cannot pay HMRC, it is important to act quickly. Missing a VAT, PAYE or Corporation Tax payment does not automatically mean your company has to close, but unpaid HMRC debt can escalate if it is not addressed.
The options available will depend on how much your company owes, its wider financial position and whether the underlying business remains viable.
At Umbrella.UK Insolvency, we help company directors understand their position and the options available when a business is struggling to pay HMRC.
Owe HMRC money? Don’t wait for HMRC to take further action. Speak confidentially to a Licensed Insolvency Practitioner about your company’s options.
What should I do if my company can’t pay HMRC?
The first step is to establish whether the problem is temporary or part of a wider financial difficulty.
Consider:
- How much does the company owe HMRC?
- Which taxes are overdue?
- Does the company owe money to other creditors?
- Can it continue paying employees and other ongoing costs?
- Is there sufficient cash expected into the business to clear the arrears?
- Is the underlying business still profitable and viable?
This distinction is important because a viable business experiencing a temporary cash flow problem may have different options from a company that is unable to pay its debts and has no realistic prospect of recovery.
Can I arrange more time to pay HMRC?
Potentially.
HMRC may agree a Time to Pay arrangement which allows a company to repay tax arrears over an agreed period.
HMRC will normally want to understand why the debt arose, what the company can realistically afford and whether future tax liabilities can be paid as they fall due.
A payment plan will not be suitable for every business. If the company cannot afford both the repayments and its ongoing liabilities, a Time to Pay arrangement may simply delay a more fundamental problem.
Does owing HMRC mean my company is insolvent?
Not necessarily.
However, if your company cannot pay HMRC when its tax liabilities fall due, particularly alongside other creditors, this may be an indication of insolvency.
Two commonly used ways of assessing insolvency are whether the company can pay its debts as they fall due and whether its liabilities exceed the value of its assets.
If you believe the company may be insolvent, seeking professional advice promptly is important. Directors’ responsibilities become particularly important once a company is insolvent or approaching insolvency.
What happens if I don’t pay HMRC?
HMRC has a range of debt collection and enforcement options.
Depending on the circumstances, these can escalate from requests for payment through to formal recovery action and ultimately proceedings to wind up the company.
The further the situation progresses, the fewer options may be available to the business.
If you have received formal correspondence or legal action from HMRC, do not ignore it.
What options does a company with HMRC debt have?
The appropriate solution depends on whether the business can realistically recover.
HMRC Time to Pay
If the company is viable and the problem is temporary, HMRC may agree to spread repayment of the tax debt.
Company Voluntary Arrangement (CVA)
A CVA can allow an insolvent but potentially viable company to reach a formal agreement with its creditors and continue trading, provided the proposal is approved and sustainable.
Administration
Administration may be appropriate in certain circumstances where there is a viable business or assets to protect and one of the statutory purposes of Administration can be achieved.
Creditors’ Voluntary Liquidation (CVL)
If the company is insolvent and there is no realistic prospect of recovery, a CVL may provide an orderly way to close the company.
A Licensed Insolvency Practitioner can help establish which, if any, of these options is appropriate.
Can I liquidate my company if it owes HMRC?
Yes. HMRC debt does not prevent a company from entering a Creditors’ Voluntary Liquidation.
HMRC would usually become a creditor within the liquidation and the company’s affairs would be dealt with by the appointed Liquidator.
Don’t wait until HMRC takes further action
HMRC debt can feel difficult to tackle, particularly when other business pressures are building at the same time.
But leaving the problem generally reduces rather than increases your options.
The earlier you understand the company’s true financial position, the sooner you can decide whether the debt can be managed or whether a formal insolvency solution needs to be considered.
Speak confidentially to Umbrella.UK Insolvency
Umbrella.UK Insolvency helps company directors across England and Wales who are dealing with HMRC arrears and wider financial difficulties.
Our Licensed Insolvency Practitioners can assess your company’s circumstances, explain the options available and help you understand the appropriate next steps.
Company can’t pay HMRC?
Speak to us before the situation escalates.
