What to Do When Your Company Cannot Pay HMRC
Start with accurate tax balances, a short-term forecast and the stage of any enforcement action.
Published by Vanguard Insolvency · General guidance
Act before the next deadline
If the company cannot pay a tax bill, deal with the position as soon as it becomes clear. Do not wait for the next reminder or assume that filing a return can be postponed until cash improves. Ask the accountant to confirm the liability and identify any missing returns.
Further reading: HMRC guidance on payment plans.
Separate the different taxes and accounting periods. Record the amount due, interest or penalties shown, correspondence received and any response date. If the company has a winding-up petition, treat the court timetable as a separate urgent issue.
Build a forecast that includes new tax
A repayment plan is only useful if the business can keep paying what falls due while reducing the old balance. Forecast receipts and essential costs by week, and include VAT, PAYE and other new taxes at their actual payment dates.
Use realistic assumptions about when customers will pay. Show the effect of a late receipt or quieter trading period. If the plan works only when every customer pays immediately, it may not leave enough room for ordinary trading risk.
Consider a Time to Pay proposal
HMRC may agree instalments after reviewing affordability and the circumstances. Prepare the proposed payments, supporting figures and an explanation of what caused the arrears. Do not promise a fixed repayment period or assume that a request has been accepted before HMRC confirms the terms.
Keep records of discussions, deadlines and any agreement. Make sure the person processing payments understands which taxes and dates the arrangement covers. If a payment will be missed, address that promptly rather than waiting for the plan to fail.
If a repayment plan is not affordable
When the company cannot meet current costs, a tax arrangement alone may not solve the problem. A wider review should compare restructuring with closure and identify the implications for creditors, employees and directors.
Prepare a full creditor list rather than focusing solely on HMRC. Include finance, rent, guarantees, director loan accounts and disputed liabilities. Taking professional advice early helps the board make decisions using the whole financial picture.
Start with the facts
Bring a current picture of debts, assets, cash flow and any creditor deadlines.
- Latest accounts and bank balances
- HMRC and supplier arrears
- Court papers or enforcement notices
- A short cash-flow forecast
Questions about your options
No. HMRC assesses a proposal and may refuse terms it does not consider appropriate.
The company needs to assess all liabilities and creditor interests. A tax proposal should form part of a sustainable plan.
Related support
Company Rescue & Restructuring
If the business has a viable future, explore ways to stabilise cash flow, address arrears and keep trading.
HMRC Time to Pay
A realistic instalment proposal may help a business address overdue tax while meeting its ongoing commitments.
Talk through your next step
Tell us what is happening. We will help you understand the information needed to assess your options.