PAYE Arrears is something to take seriously.

When you speak with HMRC about having problems paying PAYE, the level of faith they have in your company will largely be dictated by your tax history. If this is the first time that you’re having trouble paying PAYE, HMRC will react differently than if they were dealing with a company that has missed payments repeatedly.

This article will explain how to deal with PAYE arrears, the potential penalties, and consequences, as well as offer solutions.

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What Happens if you Don’t pay PAYE?

If you don’t have the money, your first concern is going to what happens next?

In the first instance, you will receive an automated letter reminding you to pay. The letter will explain that you need to pay immediately and outline the ways you can do.

Following on from this, HMRC will begin to escalate the situation. Initially, they will charge penalties for late payment. The amounts of these – detailed below – depending on how often you have defaulted.

If you simply cannot pay at all, their stance will slowly grow tougher. Expect to receive increasingly threatening letters followed by legal action.

Ultimately, HMRC has the power to force your company into liquidation for non-payment for debt via something called a Winding-up Petition. HM and Revenue issue more of these per year than any other creditor.

The key thing to remember is that putting your head in the sand is the worst thing you can do. Whether you’re having cash flow issues, or even if the late PAYE is a symptom of more serious financial issues within your company, you need to keep in touch with them.

Keep in touch with HMRC’s Business Payment Support Service

If this is your first instance of payment difficulty, you should try the HMRC Business Payment Support Service (BPSS) as they will assess your case on its own merits.

If this isn’t the first time and you’ve received a letter from HMRC on the matter, it’s important that you call the precise office that contacted you – there is no point in contacting the HMRC Business Payment Support Service at this stage given that your situation has already progressed past this point.

If you need general advice regarding your tax responsibilities as an employer, you can contact HMRC via:

0300 200 3200

Or write to them at their postal address:

National Insurance Contributions and Employers Office,
HM Revenue and Customs,
BX9 1BX,
United Kingdom.

When is PAYE Due?

Payment must be made to HM Revenue and Customs by:

  • the 22nd of the next tax month for those who pay monthly
  • the 22nd after the end of the quarter for those who pay quarterly
  • the 19th of the month for those who pay by cheque through the post

Since 06/04/13, employers should be reporting PAYE information to HMRC in real time. This is also referred to as ‘Real Time Information’ – or ‘RTI’.

Check what you owe on the Paye Tax Calculator

If you have your employer tax code to hand, you can click this link to use the PAYE calculator.

What is the Penalty for Late Payment of PAYE?

HMRC charge penalties from what they term ‘the penalty date’ which is generally the day after the due date.

The penalties are a percentage of the total amount that is late, and increase exponentially depending on the number of defaults in a tax year.

Number of Defaults
in a Tax Year
Penalty Percentage Applied to the Amount
That is Late in the Relevant Tax Month
( ignoring the first late payment in the tax year )
1 to 31%
4 to 62%
7 to 93%
10 or more4%

What are my Options for Paying PAYE Arrears?

We have a great deal of experience helping companies with HMRC and PAYE arrears issues.

As well as being experienced negotiators with HM and Revenue, we can advise you of the full range of options available for someone in your situation. With PAYE specifically, these include:

Time to Pay Arrangement (TTP) for PAYE

HMRC may accept a Time to Pay Arrangement, which is an agreed payment plan.

In order to qualify you will be expected to demonstrate that the company can afford to repay the PAYE over a maximum of twelve months, along with any other taxes in the tax return that are due for the tax year.

Company Voluntary Arrangement

For many companies with tax issues with PAYE, corporation tax arrears and VAT debtHMRC arrears can be a symptom of a larger problem.

If other creditors are threatening, a Company Voluntary Arrangement (CVA) can offer a better solution than a Time to Pay Arrangement. You can delay tax and creditor payments for up to 5 years, and the debt itself can be discounted!

Although a CVA is considered an insolvency procedure it does not mean the company goes bust but is a rescue mechanism which can help a company get back on its feet. In the right circumstances, the CVA can be a formidable company rescue tool.

Invoice Finance / Factoring

Invoice or asset based finance is the ability to sell unpaid due invoices. Unlike traditional finance which can be impossible to reach for businesses with less than perfect credit, invoice finance lenders assess the credit of the company against which the invoice has been raised.

This is a powerful form of alternative finance which can radically improve cash-flow in the right situation.

Can I be held Personally Liable for PAYE Arrears Debts?

If the government suspects that you have deliberately, or intentionally failed to pay your statutory tax duties, they have the right to submit what is called a Personal Liability Notice (PLN).

As per Section 121C, Social Security Administration Act 1992, PLN’s give HMRC the power to hold company directors personally accountable in situations where there appears to be fraud or serious neglect.

Call us now for confidential expert help

If you’re feeling stressed and under pressure with PAYE debts, please call one of our confidential advisers for a free consultation. Over the last year, we’ve negotiated over £2,000,000 with HMRC. Call us on 08000 746 757 or try our senior turnaround practitioner, Sue Collins direct on 07949 969 006.

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