Unsurprisingly, HM and Revenue is the biggest business creditor in the UK.

This may be down to the fact that cash-strapped businesses tend to prioritise supplier bills over paying HMRC since without this they can’t continue trading. Equally, because taxes like VAT are only due in instalments, it’s easy for businesses to spend money in their account rather than putting it safely aside.

Because of this, the HMRC Debt Management and Banking Department (DMB) has a refined system of debt enforcement which it uses to force companies to pay what they owe. Its methods range from threatening letters, through to in-person visits, bailiff action, and even Winding up Petition letters which can lead to the forcible liquidation of a company.  This article aims to explain some of the most common types of HMRC debt, and the options available to clear it.

Types of HMRC Debt

VAT Debt

VAT Arrears is a very common scenario for many British businesses but, from HMRC’s perspective, it’s a debt they take very seriously. Interest and penalties are the first stages of escalation, with debt enforcement via a third-party debt collection agency the next step. You should know that HMRC doesn’t need a court order to take bailiff action against you, they can simply seize your possessions via what is known as Control of Goods.

Corporation Tax Arrears

Late payment of Corporation Tax is enforced with slightly less severity by HMRC than VAT but is nevertheless something to take seriously. Those having payment problems should try HMRC’s Payment Advice Service, or – if the situation has gone beyond that point, call us on 08000 746 757. We’re experienced meditators with HM and Revenue.


The employer’s responsibility to collect tax and National Insurance Contributions is collectively termed as PAYE. Processed by HMRC’s Real Time Information System, these are supposed to be paid monthly and late payments will result in financial interest and penalties. Any late payments of PAYE are a sign of possibly endemic financial issues so, as with Corporation tax and VAT, it’s worth keeping in close contact with HMRC and/or possibly negotiating a Time to Pay Arrangement.

How a Time to Pay Arrangement Can Help with HMRC Debt?

A Time to Pay Arrangement is a formal arrangement with HMRC to pay them back over a period of usually 6-12 months. Longer periods can be arranged, on occasion, but this where the experience of a professional adviser can really make a difference so we could recommend you bring us in to mediate on your behalf.

Debt Consolidation Loans or Debt Management Plans

Both debt consolidation loans and debt management plans can be viable options if your HMRC debt is a part of a debt bundle. That said, HMRC are usually reluctant to payment plans which go on for too long, so a Time to Pay Arrangement on HMRC’s terms is likely to be the best deal you’ll get as regards money owed the government, unless your DMP timeframe is unusually short.

What are HMRC’s policies if you ignore your tax bills?

Late Payment Interest and Penalties – See our full page on Penalties and Interest Rates

Direct Recovery of Debts – HMRC have the power to take money directly from your bank account

Controlled Goods Order – HMRC can seize your goods and sell them to cover your debts. Read more here.

Court Action – If HMRC takes you to Court, you might be liable for Court Fees in addition to your existing debt.

Call us now for help with your HMRC debts

We know only too well the stress which harassment from HMRC can bring. Call us now on 08000 746 757 for a free, confidential conversation about what your options are. We can help with advice, as well as a range of practical, manageable solutions.