HMRC Debt Advice for Limited Company Directors
Behind with VAT, PAYE or Corporation Tax? We’ll help you understand your options and find the best way forward, before the situation gets worse.
HMRC arrears
Support with VAT, PAYE and Corporation Tax debt.
Time to Pay
Help understanding whether an affordable repayment plan may be realistic.
Liquidation advice
Clear, practical guidance if closing the company may be the right option.
Director concerns
Understand potential issues affecting you personally as a director.
When does HMRC debt become serious?
HMRC debt becomes more concerning when the company cannot keep up with new liabilities, arrears continue to grow, other creditors are also going unpaid or HMRC begins escalating recovery action.
If you are struggling to keep up, it is usually better to understand the position early rather than wait for enforcement or a winding-up petition.
What are my options?
The right solution depends on your company’s position, but common options include:
- Agreeing a Time to Pay arrangement with HMRC
- Restructuring or seeking additional time or funding
- Considering a Company Voluntary Arrangement where appropriate
- A Creditors’ Voluntary Liquidation if the company is not viable
- Getting advice on your position as a director
What happens when you contact DCA?
A confidential chat
Tell us what’s happening and we’ll listen, without judgement.
Clear, practical advice
We’ll explain your realistic options in plain English.
A way forward
You’ll get honest guidance on the best next steps for you and your company.
My company cannot pay HMRC — what should I do?
If the company cannot pay HMRC on time, the important thing is to understand whether this is a temporary cash-flow problem or a sign that the company can no longer meet its debts as they fall due.
Do not look at the overdue tax bill in isolation. A sensible review should include the tax arrears, new liabilities becoming due, other creditors, employees, finance commitments, available assets and the company’s future trading prospects.
- Confirm how much is owed and which taxes are overdue.
- Check whether new VAT, PAYE or Corporation Tax liabilities are building.
- Identify any other overdue creditors, loans, wages or rent.
- Consider whether current trading is genuinely profitable.
- Assess whether future tax can be paid when it falls due.
Which HMRC liabilities cause problems?
Companies often contact us after one tax payment has been missed and the arrears have gradually spread across several liabilities.
- VAT
- PAYE
- National Insurance contributions
- Corporation Tax
- Construction Industry Scheme liabilities
- Interest and penalties
Can the company genuinely afford to recover without creating new arrears or increasing losses to creditors?
Can my company get a Time to Pay arrangement?
A Time to Pay arrangement can allow overdue tax to be repaid by instalments. HMRC will normally want to understand the company’s income, expenditure, assets, other liabilities and the proposed monthly payment.
A payment plan is most useful where the underlying business remains viable and the company can maintain both the agreed instalments and new tax and normal trading costs.
- The proposed payments need to be realistic and affordable.
- The company should be able to meet new liabilities as they arise.
- Available funds or assets may need to be considered.
- If circumstances change, engage with HMRC rather than simply missing payments.
What if Time to Pay is refused or fails?
HMRC does not have to accept every proposal. A refusal may mean the suggested payments are not considered sufficient, the financial information does not support the plan or the overall position raises wider concerns.
If an arrangement has already failed, repeated promises that the company cannot keep may only delay the point at which a more fundamental decision is required.
If historic arrears can only be serviced by missing new VAT, PAYE, Corporation Tax, wages or suppliers, the underlying problem has not been solved.
What can happen if HMRC debt is left unresolved?
Continued non-engagement can lead to progressively more serious recovery action.
Payment demands
Further contact and requests for payment of the outstanding tax.
Debt recovery
Debt collection activity or enforcement against company assets where appropriate.
Court action
Formal legal steps may be taken where the position remains unresolved.
Winding-up petition
HMRC can ultimately seek the compulsory liquidation of a company unable to pay its debts.
Can I liquidate a company that owes HMRC?
Yes. Owing money to HMRC does not prevent an insolvent company from entering a Creditors’ Voluntary Liquidation.
A CVL may be appropriate where the company cannot pay its debts, arrears are increasing, creditor pressure is becoming serious and there is no realistic route back to sustainable trading.
Liquidation should not be treated as the automatic answer simply because HMRC is owed money. The company’s full circumstances should be considered first.
Will I personally have to pay my company’s HMRC debt?
Not automatically. The normal starting point is that VAT, PAYE, Corporation Tax and other liabilities owed in the company’s name are company debts.
Personal exposure can arise in particular circumstances, including guarantees, overdrawn director’s loan accounts, misconduct-related claims or specific HMRC powers.
VAT, PAYE and Corporation Tax arrears
VAT arrears
Look at whether the VAT shortfall is a one-off timing problem or part of a wider pattern. Consider upcoming VAT, other taxes, suppliers, wages and whether the company can genuinely catch up.
PAYE / NIC arrears
PAYE arrears can be a warning that cash intended for tax is being used to meet wages or other urgent business costs. If current and historic liabilities cannot both be funded, review the position promptly.
Corporation Tax arrears
A single bill may be manageable with time, but the position is different where the company is also behind with VAT, PAYE, suppliers, finance or wages.
Can HMRC object to a company being struck off?
Yes. Where tax remains outstanding or tax affairs are unresolved, HMRC may object to a voluntary strike-off application.
If an objection has been made, establish the reason. It may involve outstanding returns, an unpaid balance, another HMRC query or a wider insolvency issue.
Strike-off is not a substitute for dealing properly with an insolvent company’s creditors.
Should I keep trading if the company owes HMRC?
Owing HMRC money does not automatically mean a company must stop trading. The key issue is whether continued trading has a credible purpose and whether the company can avoid making the position worse.
- Can ongoing liabilities be met?
- Can the business trade profitably?
- Can any payment arrangement be maintained?
- Is creditor exposure increasing?
- Is there a realistic route to a sustainable position?
What should directors be careful about when HMRC is chasing?
Assets and transfers
Take advice before transferring or selling company assets to directors, shareholders or connected parties.
Selective payments
Be cautious about unusual payments to particular creditors where the company may already be insolvent.
Further borrowing
Consider whether new borrowing genuinely improves the position or simply delays a problem the company cannot resolve.
Director drawings
Large or unusual withdrawals can create issues, particularly where a director’s loan account is already overdrawn.
Trying to strike off
Do not treat strike-off as a way of bypassing creditors where the company is insolvent or tax remains outstanding.
Ignoring deadlines
HMRC letters, enforcement notices and court documents should be dealt with promptly before options narrow.
Practical, plain-English help for directors
DCA Business Recovery is an independent, family-run insolvency practice based in Southend-on-Sea, Essex. We advise directors locally and across the UK.
Our approach is straightforward: understand the facts, explain the available options and help you make an informed decision without unnecessary jargon or pressure.
You do not have to wait for court action
- Free initial advice
- Confidential conversations
- Clear explanations in plain English
- Advice on rescue as well as closure
- No pressure to enter liquidation
HMRC debt questions from company directors
Can HMRC refuse a Time to Pay arrangement?
Can I liquidate a company that owes HMRC?
Will the company’s HMRC debt become my personal debt?
Can HMRC close my company?
Can HMRC object to my company being struck off?
Should I stop trading because HMRC is owed money?
What if I cannot afford the existing Time to Pay arrangement?
Is HMRC debt written off in liquidation?
Speak to us about your HMRC debt
Get free, confidential advice from a friendly, experienced team.
This page provides general information only and is not legal or tax advice. The appropriate course of action depends on the circumstances of the company and its directors. Specific professional advice should be obtained before taking action.