Company Cannot Pay PAYE – What Should I Do?

If your company cannot pay its PAYE or National Insurance liabilities to HMRC, it is important to address the problem quickly.

PAYE arrears can be an indication that the business is experiencing significant cash flow pressure, particularly if it is also struggling with VAT, Corporation Tax, suppliers or other debts.

At Umbrella.UK Insolvency, we help company directors assess the seriousness of HMRC arrears and understand the options available.

Company behind with PAYE?

Speak confidentially to a Licensed Insolvency Practitioner before the debt escalates.

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Call 01625 546 240 for immediate help

What happens if my company doesn’t pay PAYE?

Employers are responsible for reporting and paying the relevant PAYE tax and National Insurance liabilities to HMRC.

If payments are missed, arrears build up and HMRC can pursue the company for the outstanding debt. Interest and penalties may also apply depending on the circumstances.

Repeatedly missing payments can lead to increasingly serious HMRC recovery action.

Why do businesses fall behind with PAYE?

PAYE arrears are often a symptom of cash flow difficulties elsewhere in the company.

Common pressures can include:

customers paying late
falling revenue
rising payroll and operating costs
unexpected expenses
existing HMRC debt
VAT or Corporation Tax liabilities
insufficient working capital

Some businesses find themselves using money intended for HMRC to meet wages or other immediate costs.

While this may address an urgent short-term problem, it can result in HMRC debt accumulating quickly.n.

Can HMRC give my company more time to pay PAYE?

HMRC may agree a Time to Pay arrangement in appropriate circumstances.

This could allow the company to repay PAYE arrears over an agreed period rather than immediately.

However, HMRC will expect the company to demonstrate that the arrangement is affordable.

If the company cannot meet the proposed repayments while also keeping up with new tax liabilities and its other costs, a payment arrangement may not solve the underlying financial problem.

Are VAT arrears a sign that my company is insolvent?

They can be.

A single missed VAT payment caused by a temporary cash flow issue does not automatically make a company insolvent.

However, if the business repeatedly cannot meet VAT liabilities when they fall due, or is also struggling to pay employees, suppliers, lenders or other taxes, this can indicate a wider insolvency problem.

At this point, directors should consider seeking professional advice rather than continuing to accumulate debt.

Do PAYE arrears mean my company is insolvent?

Not automatically.

A temporary shortage of cash may be recoverable, particularly where the company has reliable income due shortly.

However, if the company is regularly unable to pay PAYE and other liabilities when they fall due, this can be a significant warning sign of insolvency.

Directors should look at the company’s overall financial position rather than treating each unpaid bill in isolation.

What happens if PAYE arrears keep increasing?

Ignoring PAYE debt can allow both the amount owed and the seriousness of HMRC’s recovery action to increase.

Ultimately, unpaid HMRC debt can contribute to HMRC seeking to wind up the company.

If HMRC has started formal enforcement action, you should seek professional advice promptly.

What options are available if my company can’t pay PAYE?

The appropriate route depends on whether the company has a viable future.

Time to Pay

If the difficulty is temporary and the company can afford repayments, an HMRC Time to Pay arrangement may be an option.

Company Voluntary Arrangement

If the business remains viable but has accumulated debts it cannot pay immediately, a CVA may be considered in suitable circumstances.

Administration

For some businesses experiencing serious financial difficulties, Administration may be appropriate if one of its statutory purposes can be achieved.

Creditors’ Voluntary Liquidation

If the company is insolvent and cannot realistically recover, directors may need to consider a CVL.

The correct solution can only be determined after considering the company’s full financial position.

Can PAYE debt be included in a CVL?

Yes. PAYE and other HMRC liabilities can form part of the company’s debts when it enters a Creditors’ Voluntary Liquidation.

The appointed Liquidator will deal with creditor claims and the company’s affairs as part of the formal liquidation process.

Speak to Umbrella.UK Insolvency about PAYE arrears

If your company has fallen behind with PAYE, the important question is whether the business can realistically recover and meet its future liabilities.

Umbrella.UK Insolvency can help you assess the position and explain the options available.

Can’t pay PAYE or other HMRC liabilities?

Speak confidentially to a Licensed Insolvency Practitioner.

Request a free consultation

Call 01625 546 240 for immediate help

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