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Tax Arrears

When your company doesn’t pay its VAT, PAYE, NIC or Corporation Tax on time or simply can’t afford to pay its taxes at all, it will raise suspicions from HM Revenue and Customs about its financial solvency.

This can lead to your company coming under pressure from HMRC and facing the extremely serious prospect of being subject to a winding up order. It’s important that you take immediate action if your company falls behind paying its taxes.

Most companies fail to pay their taxes on time due to cash flow issues. HMRC is an aggressive creditor and will typically take serious action to recover what it’s owed, but it isn’t unreasonable and will listen to your company’s explanation.

From entering into administration to working out a Time To Pay arrangement with HMRC, there are several options available to companies with tax arrears that, when used early in the collections process, can protect you from compulsory liquidation.

Does your business owe VAT, PAYE or other essential taxes to HMRC? Read on to learn more about the options available to your company to end pressure from HM Revenue and Customs and solve its tax issues.


Quick facts about tax arrears:

  • Most UK companies need to pay VAT and PAYE contributions to HMRC, as well as Corporation Tax and National Insurance contributions.
  • If your company doesn’t pay its taxes on time, it could come under pressure from HMRC. Late payment or underpayment of VAT could also result in you being charged interest on your company’s balance.
  • HMRC can and will take aggressive legal action against companies that fail to pay taxes and ignore official warning letters. It can also apply surcharges for companies that default on their tax arrears.
  • If your company falls behind on its taxes, there are options available. These include a Time To Pay arrangement with HMRC, which allows your company to pay its tax in the form of a monthly instalment.


Does your company have tax arrears?

If your company doesn’t pay its taxes, it will quickly come under legal pressure from HM Revenue and Customs. The tax collection process usually begins with an official warning letter providing your business with seven days to pay its tax arrears.

Due to the short payment period of HMRC’s official warning, receiving a letter could cause your company to become insolvent. It’s best to take action before receiving an official warning if your company has significant tax arrears.

Unlike commercial creditors, which are required by law to prove the legitimacy of their debts before seeking a winding up petition against your company, HMRC can move forward with legal action without such measures.

If your business fails to respond to an official warning letter from HMRC, it will be wound up and its assets liquidated. HMRC acts swiftly against businesses that have significant tax arrears, making immediate action extremely important.

Luckily, there are solutions available for companies with tax arrears. Your company may be able to raise cash to pay its tax arrears using invoice factoring or emergency finance, or negotiate a Time To Pay arrangement with HMRC.

In certain cases, your company may be able to protect itself against legal action from HMRC and pay its tax arrears over time through a Company Voluntary Arrangement.


What options are available for companies with tax arrears?

There are several options available for companies with tax arrears. Companies that are financially solvent, free of cash flow problems and capable of paying the amount they owe to HMRC have the widest range of options available.

Time To Pay Arrangement

A Time To Pay arrangement, also known as a TTP, is a long-term instalment plan for companies with significant HMRC arrears. In a TTP, a company can pay its taxes in a monthly payment until the arrears are completely paid off.

The main benefit of a Time To Pay arrangement is that it improves your company’s cash flow. Instead of paying a lump sum, which may be beyond your abilities, a TTP lets your company pay an affordable amount without affecting normal cash flow.

Your company needs to have a viable future to enter into a TTP with HMRC. We can prepare an agreement to propose to HMRC and conduct negotiations to ensure your company receives a fair and realistic instalment plan.

Learn more about Time To Pay arrangements


Invoice Factoring and Financing

Has your company received a warning letter from HMRC that it can’t afford to pay without negatively affecting cash flow? If your company needs help with cash flow to pay its tax arrears, invoice factoring is an effective and affordable solution.

Invoice factoring is a solution designed to improve cash flow. Instead of waiting 30 to 60 days to collect payments from customers, your company sends its invoices to the factoring provider and receives a payment, typically within 24 hours.

This payment provides the cash flow your company needs to recover from a major expense, such as a lump sum payment to HMRC. The factoring company collects the payment from customers, reducing the workload your company faces.

Learn more about invoice factoring


Company Voluntary Arrangement

If your company is under pressure from HMRC and other creditors, one of the most effective ways to relieve this pressure and provide a long-term path towards a full financial recovery is by proposing a Company Voluntary Arrangement, or CVA.

A CVA is an agreement between your company and its creditors to pay back some or all of its debts in the form of a monthly payment over a period of several years.

With a successful CVA, your company gains an opportunity to improve its cash flow while repaying creditors. Its creditors, including HMRC, receive a greater amount of cash on your company’s debts than they could recover through liquidation.

Learn more about Company Voluntary Arrangement


Get expert financial help

Does your company owe money to HMRC? If your company has tax arrears for VAT, PAYE and NIC or Corporation Tax, you should act as soon as possible to ensure that HMRC doesn’t take aggressive action to wind up the company.

Whether your company needs to negotiate a Time To Pay arrangement or can raise cash using a solution such as invoice factoring, we can help you explore the options available to your company and make the right decision.

Contact us to speak to an insolvency expert and learn more about the options that are available for companies with tax arrears. We can provide help and assistance to ensure your company isn’t subject to legal action or pressure from HMRC.