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I can't pay my VAT this month. Will HMRC issue a distraint order?

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I can't pay my VAT this month. Will HMRC issue a distraint order?

Judging by our books it looks like we’re not going to be able to pay the VAT bill this month. We’ve heard about arranging a payment plan with HMRC, but we also know that if a distraint order is issued it would be very bad for our business. If I can’t pay my VAT this month will HMRC go straight to issuing a distraint order against us?


To give you an adequate answer we really would need a bit more information. The first thing we would need to know is whether or not this is your first late payment. Usually HMRC will attach a surcharge to late payments and will only issue a distraint order after repeatedly trying to collect money due to them. Keep in mind that it is imperative that you file on time even if you can’t pay all or part of your bill.

One mistake which many business owners or directors make is in believing that they need to pay all or nothing. As much as you can pay will be accepted and any surcharges will only be calculated on the amount still owing. The more you can pay, the less your penalties will be in the end. If you feel that you will be unable to pay anything at all, contact HMRC before your filing date. They may agree to give you extra time if you meet with specific requirements.

Another error in judgement which may be simply something which went overlooked is in terms of when you have set up a Direct Debit of payment from your bank account. If the money won’t be there on the date when the debit will take place, contact your bank to stop payment immediately. HMRC advises you to speak with your financial adviser when you will be late making payments so that they can help you seek alternatives to distraint and/or a winding up petition.

In most cases you will have plenty of warning before HMRC issues a distraint order, but why would you want to take on extra debt with the surcharges they impose? The worst thing you can do is let that filing date come and go without making arrangements in advance. Talk to the financial advisers and insolvency specialists at Real Business Rescue to help you avoid the repercussions of paying VAT late. We offer a free initial consultation at which point we can further advise you. The key point to keep in mind is to find a solution prior to paying VAT late and this is something we can help you do. 

Contact our team

Jonathan Munnery
Andrew MacKenzie
Julie Palmer
Jenn Stewart
Keith Tully
or find your nearest office

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