What are the likely consequences and what repayment options do you have?

Even if your business is facing challenges, timely payments of PAYE, VAT, and Corporation Tax are still expected. While HMRC may offer some flexibility, addressing tax debts promptly is crucial, as the repercussions of non-payment can be severe.

HMRC possesses robust enforcement powers to retrieve tax debts and is known for swift action. In addition to court proceedings and bailiffs, it has the authority to initiate liquidation proceedings against companies to recover owed funds and prevent the accumulation of further tax debts.


What action will HMRC take if I cannot pay my tax bill?

If you miss your payment deadline and fail to settle your owed amount, you’ll face a series of escalating consequences. Initially, a penalty for late payment will be imposed, accompanied by accruing interest on the overdue sums from the due date, adding to your debt.

Subsequently, you’ll receive reminders and warning letters, which should be treated seriously. Ignoring these may lead to a County Court Summons. If the debt remains unpaid or unchallenged within 14 days, a County Court Judgment (CCJ) may be issued, confirming the debt legally and indicating insolvency. 

At this stage, your business is in a precarious position, negatively impacting its credit rating. The CCJ opens the door for HMRC to initiate a Winding Up Petition, potentially compelling Compulsory Liquidation. HMRC holds the authority to wind up more companies than any other creditor, making this a significant threat that demands serious attention.


I can’t pay my business’s tax bill on time – what can I do?

Notify HMRC as soon as possible if you are facing challenges in paying a tax bill, preferably before the payment deadline. While it may be tempting to ignore the issue, failing to communicate your efforts to HMRC can lead to escalating pressure. This may result in fines, interest charges, legal actions, and visits from bailiffs, adding stress and expenses.

Seeking professional guidance is invaluable when dealing with difficulties in paying a tax bill. We can offer honest and reliable advice, clarifying your position. We will explore options with you and negotiate with HMRC on your behalf to prevent an escalation of arrears and mitigate the impact of its formidable debt recovery measures.


What are the alternatives if I can’t pay my business’s tax bill?

You have various options available that can potentially save your business and provide more time to pay or close it in the most beneficial way.

1. Time to Pay arrangement:

If you struggle with VAT, PAYE, or Corporation Tax arrears, HMRC may consider a Time to Pay (TTP) arrangement. This informal agreement allows you to repay the owed amount over a period, typically three to six months, occasionally extending to 12 months. The affordability of your proposal will be closely examined by HMRC, requiring a realistic monthly repayment plan, including clear financial forecasts.

2. Formal repayment arrangement:

If an informal arrangement isn’t suitable or has failed in the past, and HMRC refuses proposals, a Company Voluntary Arrangement (CVA) could be an option. This formal insolvency procedure involves negotiating with creditors, repaying owed amounts in monthly instalments over three to five years. If accepted, debts are frozen, and legal actions cease.

3. Company administration:

Opting for company administration provides an eight-week moratorium, protecting your company from legal actions. During this period, insolvency practitioners assess the business’s long-term viability and develop a restructuring plan, which may involve asset sales or a formal repayment arrangement like a CVA. If deemed insurmountable, the company may be closed down.

4. Voluntary liquidation:

If the company is financially non-viable and unable to settle tax debts, a Creditors’ Voluntary Liquidation (CVL) may be the best choice. Opting for voluntary liquidation protects creditor interests and fulfills your legal obligations as a director. An appointed insolvency practitioner manages the process, selling assets to repay debts, writing off remaining amounts, and dissolving the company. Taking control reduces the risk of allegations and may make you eligible for director redundancy pay, covering liquidation fee

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Need professional advice?

If you’re facing challenges in settling your tax bill, we offer professional and dependable guidance to help you navigate the situation, preventing detrimental actions by the tax authority and identifying the optimal solution for your business. Schedule a meeting at one of our 100+ offices across the UK or call our experts for a free, same-day consultation. 

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

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.