If you can’t pay your HMRC tax bill, you may think the best thing to do is ignore it. However, this is the worst possible course of action. The longer you wait, the more interest and penalties will accrue, and the more likely it is that HMRC will take enforcement action against your business.

The good news is that you have options. You may be able to negotiate a payment plan with HMRC, or you may need to enter into a formal insolvency procedure such as administration or liquidation.

This article will explore the subject in detail, exploring consequences, options and timeframes.

Remember, if you are struggling to pay your tax bill, it is important to seek professional advice. A licensed insolvency practitioner like ourselves can help you assess your options.

Cant Pay Tax Bill

What to do if You’re Struggling to Pay Your Tax Bill

If you are a business owner struggling to pay your HMRC tax bill, there are a number of steps you can take:

  1. Contact HMRC as soon as possible. HMRC is generally willing to work with businesses to find a solution to their tax debt problems. They may be able to agree to a Time to Pay Arrangement, which will allow you to pay off your debt in instalments.
  2. Be honest and upfront with HMRC about your financial situation. If possible, provide them with a copy of your business plan and cash flow forecast. This will help them understand your situation and assess your ability to repay your debt.
  3. Be realistic about how much you can afford to repay each month. Don’t agree to a Time to Pay Arrangement that you won’t be able to keep up with. This will only make your situation worse in the long run.
  4. Stick to the terms of your Time to Pay Arrangement. If you are unable to make a payment, contact HMRC immediately to explain the situation.
  5. Do take independent advice if all else fails – We specialise in advising company directors in the UK about company debt.

What Happens if You Can’t Afford to Pay HMRC?

(1) HMRC may Retain the Services of a Commercial Debt Collection Agency

HMRC currently uses the services of 13 large commercial debt collection agencies. These agencies may telephone you, send text messages, write letters or turn up at your premises.

If they do appear on your property, you should be informed that they have no legal right to enter your premises.

(2) They May Use Bailiffs

HMRC’s powers of distraint allow them to visit your premises and inventory your company’s assets.

Depending on the situation, these are then either carried away on the spot by the officer or left with you under what’s called a Controlled Goods Agreement. This is where you acknowledge that HMRC is now the legal owner of these goods, but are allowed to keep them on your property until HMRC sells them. This is usually within seven days of their visit.

If the goods are sold for more than you owe, you’ll be sent the remainder. If they don’t cover the debt, you will still have to pay the difference.

(3) Take Money Directly From Your Bank Account

Recent powers allow HMRC to enforce what they are calling ‘direct recovery of debts’, which means they can simply take it from your bank account.

They are legally entitled to send you a letter informing you of their intention to do this, and they must also have had a face-to-face meeting with you.

The final requirement is that you should be left with no less than £5,000 in your account once the money has been deducted.

(4) Court Action

If HMRC opts to take you to court, you could be liable for court fees and HMRC’s costs in addition to your current tax bill.

(5) Force You into Liquidation

When all else fails, HMRC has the power to forcibly wind up your company. Be aware that, unlike a privately owned company, HMRC does not need to obtain a County Court Judgment (CCJ).

Where can I Find Advice on How to Deal With Tax Debt?

If you find yourself in this situation, we recommend that you take professional advice as soon as possible. Our advisors are fully licensed and regulated. We’ve helped 1000’s of company directors find their way through financial difficulty. Call us now on 0800 074 6757.

Will HMRC let me Pay in instalments?

Asking HMRC for time to pay your tax bill in instalments is one of the key options available to businesses in arrears. If HMRC agrees to a Time to Pay Arrangement, it will only apply to the tax arrears in question. Future tax bills must still be paid on time and in a single lump sum.

To get a Time to Pay Arrangement, you will need to demonstrate to HMRC that you are organized, that you will keep in regular contact with them, and that you have a realistic chance of paying back what you owe within 12 months.

It is important to note that failing to pay other taxes while you are under a Time to Pay Arrangement will be considered a default and may affect HMRC’s faith in your company’s ability to pay. This can be an important factor later on if you enter into a Company Voluntary Arrangement (CVA).

Therefore, it is vital to take all future taxes into account when preparing your cash flow forecast. This will help to prevent any further HMRC tax problems. Any default is likely to result in the automatic threat of a winding up petition.

Four Ways We Can Help You Deal with Tax Arrears

If you are a small business with significant tax debts that you are struggling to pay, we can provide experienced advice and solutions. Here are some of the options we can help you with:

  • Time to Pay Arrangement: We can negotiate with HMRC to arrange for you to pay back your debt over time in agreed instalments. This is often the best option for businesses that can show that they are viable and have a realistic plan for repaying their debt.
  • Company Voluntary Arrangement (CVA): A CVA is a structured payment plan for companies that is arranged with the assistance of an insolvency practitioner. HMRC will accept CVAs in the right circumstances, provided they are well-thought-out and presented correctly.
  • Raise Finance: If you have the option to raise finance, this may be a preferable course of action to the kind of escalation that will occur if you don’t pay HMRC. We can help you to explore your options and find the best way to secure the funding you need.
  • Voluntary Liquidation: If you cannot pay your bills and are facing threats from HMRC, taking control by voluntarily liquidating the company may be the best option available to you. We can help you to manage the liquidation process as smoothly and stress-free as possible for company directors.

In addition to the above options, we can also provide advice on other aspects of HMRC tax debt problems, such as:

  • HMRC enforcement action: We can help you to understand your rights and options if HMRC is taking enforcement action against you, such as issuing a distraint warrant or winding up petition.
  • HMRC security bonds: If HMRC believes your company is insolvent, they may ask you to provide a security bond. This is a legal document that guarantees that you will pay your tax debt. We can help you understand the implications of providing a security bond and negotiate with HMRC to try to reduce the amount required.
  • Personal liability for tax debts: In some cases, company directors can be held personally liable for their company’s tax debts. We can advise you on your personal liability and help you to take steps to protect your assets.