Tax-HMRC

What help is there for companies with HMRC tax debt?

Companies struggling to meet their tax obligations with HMRC can find assistance. A key form of support is the Time to Pay (TTP) scheme, allowing businesses with tax debts to negotiate extended deadlines for repayment. This arrangement provides extra time to settle outstanding taxes and ensure the company’s financial standing with HMRC is restored.

 

Expert help when dealing with HMRC arrears

HMRC, or His Majesty’s Revenue & Customs, is a common creditor for businesses, and dealing with them can be a daunting task for many company directors.

It’s crucial to realise that if your company is late in paying taxes or can’t pay in full, it signals to HMRC that your company may be insolvent. This triggers close scrutiny from the tax authority. Understanding the available solutions for VAT, PAYE, and Corporation Tax arrears is key for struggling businesses. For confidential and free advice tailored to your situation, consult with one of our insolvency practitioners. Our priority is helping you stay in business, and if there’s a way to satisfy HMRC, we’ll guide you through the solution.

 

A common remedy is the Time To Pay arrangement—an agreement with HMRC allowing companies to revise their tax payment schedule over a set period. HMRC needs assurance that you’ll adhere to the arrangement and repay all taxes in full within an agreed timeframe. If a longer installment plan is necessary, we can discuss alternative recovery options better suited to your circumstances.

If it can be demonstrated that your business is expected to weather its current economic challenges, HMRC may grant additional time for tax payments. Typically, HMRC sets a 6-12 month deadline for repaying owed taxes, though in some cases, it can be extended.

It’s crucial to acknowledge that HM Revenue & Customs will actively pursue owed money, even deploying Enforcement Officers to seize business assets. Ignoring the situation is the worst approach. We possess extensive experience in aiding businesses unable to meet their tax obligations and in resolving disputes with HMRC when relationships have soured.

For further details, schedule a free consultation with a Vanguard Insolvency specialist at one of our UK offices or call our dedicated director hotline for immediate, confidential advice from a licensed insolvency practitioner.

 

When your company struggles to pay taxes, PAYE, VAT, or NIC, it likely signals insolvency. As per UK Insolvency Law, directors of insolvent businesses must act in the best interests of creditors, including HMRC. Ceasing trading promptly is necessary, especially if there’s no realistic chance of overcoming financial difficulties.

Neglecting tax issues indicates to HMRC that your business is insolvent, prompting them to take debt recovery measures, potentially leading to a winding-up petition. This could ultimately result in the liquidation and dissolution of the business. If you owe HMRC but fear an inability to pay on time or in full, consider the following solutions:

 

Key Options for Dealing with Tax Arrears

1. Contact HMRC and Negotiate with Them

The initial option is to get in touch with HMRC’s Business Payment Support Service (BPSS) and inquire about establishing a ‘Time to Pay’ arrangement. However, this approach can understandably be daunting for many directors. 

Be prepared to provide some essential information when making the call, including:

  • Basic details about your business (such as company name, registered address, telephone number).
  • Information about the tax arrears causing payment difficulties.
  • An explanation for why you are unable to pay on time and in full, details of efforts made to secure the necessary funds, the amount you can immediately pay towards the debt (if any), and the duration of the extension needed

2. Have Us Negotiate Time to Pay On Your Behalf

If the thought of contacting HMRC and being in the “hot seat” is unappealing, we can manage it on your behalf. The advantage we provide over self-handling is that we collaborate with you on financial forecasting, ensuring we have the necessary information to propose more feasible terms to HMRC. Moreover, as licensed insolvency practitioners, we possess considerable expertise in these situations and boast a high success rate in assisting clients in avoiding winding up and tax penalties.

3. Utilise Asset Financing to Raise the Funds Needed

Have you considered leveraging your assets (e.g., equipment, inventory, company vehicles, property, unpaid invoices) to secure financing? If your clients are other businesses with a consistent track record of timely and full payments, you might explore invoice discounting or factoring. These options allow you to receive an advance on your invoices, providing funds that can be used to settle payments owed to HMRC.

4. Propose a Company Voluntary Arrangement (CVA)

A Company Voluntary Arrangement (CVA) is a pact between your company and its creditors, including HMRC, enabling reduced monthly payments and a consolidated payment for all unsecured debts. If approved, this proves an effective shield against legal actions by HMRC or other creditors. Engaging an insolvency practitioner is essential to formulate and propose the CVA on your behalf. This option is advisable when restructuring is necessary for multiple creditors.

5. Enter into Administration

If it appears that HMRC is heading towards winding up your company, it might be prudent to initiate company administration. This formal insolvency procedure involves directors appointing an insolvency practitioner as the administrator, aiming to facilitate the business’s recovery.

6. Arrange a Pre-Packaged Administration Sale

If a recovery appears doubtful and repaying HMRC and all creditors seems improbable, yet you wish to retain some of the company’s assets and work in progress, you might consider a pre-packaged administration sale. This involves a third party or a new company arranging to purchase some or all of the assets.

 

Understanding Letters from HMRC

During financial difficulties, the onslaught of communications from creditors, especially HMRC, can be overwhelming, and deciphering the documentation can be challenging. To assist with this, we’ve compiled a dedicated section on common HMRC letters, clarifying their meanings and providing guidance on how your company should proceed.

 

Can You Be Held Personally Liable for the Debts Your Company Owes HMRC?

If you neglect to cease trading and address tax arrears when the company is insolvent, you may face personal liability for some of its debts. Failing to settle National Insurance Contributions (NIC) could lead HMRC to issue a personal liability notice.

In the event of the company entering liquidation (likely if tax arrears persist), allegations of wrongful trading may arise if it’s discovered that you continued to acquire new clients, jobs, or orders and collected funds for products or services while the business was insolvent.

We’ve assisted numerous directors in alleviating concerns about tax arrears and arranging ‘Time to Pay’ plans with HMRC. For a complimentary consultation, contact us via email or phone today. 

Read More:

What happens after the CVL?

Following the completion of the CVL, the company will be removed from the register held at Companies House, and it will cease to exist. Any outstanding liabilities of the company will be written off unless they were personally guaranteed.

Throughout liquidation, the liquidator is obligated to scrutinise the actions of the directors (and former directors within the last 3 years). If it is determined that they did not fulfill their fiduciary duties while knowingly insolvent or engaged in transactions detrimental to creditors and subject to challenge, they may face charges of wrongful trading, fraudulent trading, or misfeasance. This could lead to directors being personally responsible for some or all of the company’s debts, and they may be disqualified from acting as directors for up to 15 years. However, such instances are exceedingly rare, and in the majority of cases, directors are free to move on and, if they wish, establish another business.

David Jackson MD
Senior Partner at Vanguard Insolvency Practitioners | Website

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.