VAT, PAYE and Corporation Tax arrears rarely stand still.
But HMRC follows a process, and it can be managed.
HMRC is usually the most persistent creditor a struggling Company has. Understanding what happens next, and when, puts you back in control of the conversation.
Know what's coming before the next letter arrives.
4 THINGS EVERY DIRECTOR SHOULD UNDERSTAND
Arrears typically move from reminder letters, to enforcement agents attending your premises, to a winding-up petition.
That journey can run its course in six months. Each stage is harder to reverse than the last.
The earlier you engage, the more control you keep.
HMRC can agree to spread arrears over an affordable period if the Company can realistically meet the payments.
Time to pay arrangements with HMRC are far harder to obtain once enforcement has started. You must keep up with the arrangement as HMRC may apply to the Court to force a liquidation over which you would have no control.
We'll help you assess whether this is realistic.
Most employee claims rank ahead of VAT and PAYE, and floating charge holders rank after claims for VAT and PAYE.
Corporation Tax is lumped together with unsecured creditors. Which taxes you owe changes the outcome significantly.
The mix of your arrears matters more than the total.
HMRC has powers to transfer certain Company tax debts to Directors personally, in defined circumstances.
These are the exception, not the rule, but they are used.
Ask the question before HMRC does.
TAX ARREARS ARE NOT THE END OF THE ROAD.
Most Companies have more options than their Directors realise — but those options narrow with every week that passes.
You are not alone. Tax arrears are one of the most common reasons Directors seek advice.
Falling behind is not, by itself, misconduct or evidence of wrongdoing.
What matters is what you do once you know the Company cannot catch up.
Don't ignore HMRC correspondence
Ignoring HMRC will fast track your Company down the enforcement track.
Don't spend money set aside for VAT or PAYE
VAT and PAYE are taxes and should not be used as working capital.
Don't agree to a plan you can't meet
A broken arrangement is harder to recover from than none at all.
Don't pay other creditors ahead of HMRC
Uneven treatment is examined closely if the Company later fails.
Don't assume the debt will be written off
HMRC rarely writes off arrears because a Company is struggling.
A confidential discussion today could help protect you tomorrow.
Tell us the basics and we'll call you back — free, confidential, no obligation.
THIS WEBSITE PROVIDES GENERAL INFORMATION AND DOES NOT CONSTITUTE LEGAL, TAX OR INSOLVENCY ADVICE. Your position depends on the individual circumstances of each Company and Director. You should obtain advice from an appropriately qualified professional, including a licensed insolvency practitioner where appropriate.
