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Tax, HMRC and VAT Help Advice and Support Service

Written by Keith Tully

When your company is having trouble paying tax, PAYE, VAT, or NIC there is a high probability that the business is already insolvent. According to UK Insolvency Law, company directors operating an insolvent business must act in the best interest of creditors (including HMRC) and cease trading immediately, especially if there is no feasible prospect of recovering from the difficulties. 

Keith Tully - Managing Director

Keith Tully

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I understand that the last people you would ever want to speak to would be a business rescue firm, but I also know that trying to deal with HMRC can be at times equally challenging. I have seen every eventuality in business and can help clarify what your options are.
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Failure to address tax problems will signal to HMRC that your business is indeed insolvent, prompting them to take action to recover the debt and possibly issue a winding up petition against your company, which would ultimately result in the liquidation and dissolution of the business. If you owe HMRC but are afraid you won't be able to come up with the money to pay on time or in full, consider the following solutions:

Key Options for Dealing with Tax Arrears

1. Contact HMRC and Negotiate with Them

The first option is to contact HMRC's Business Payment Support Service (BPSS) - 0845 302 1435 - and ask them about setting up a 'Time to Pay' arrangement. However, this route is understandably intimidating for many directors. Keep in mind you'll need to have some information ready when you call, including:

• Basic information about your business (i.e. - company name, registered address, telephone number).
• Details about the tax arrears you're having problems paying.
• You'll also need to have an explanation for why you you're unable to pay on time and in full, efforts you've taken to attempt to obtain the funds needed, how much you'll be able to pay towards the debt immediately (if any), and how long of an extension you need.

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As a business owner or director, it is imperative that you avoid HMRC petitioning to wind up your company. They have a helpline and Time to Pay Scheme so that you can find answers to your payment issues. 
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2. Have Us Negotiate Time to Pay On Your Behalf

If the idea of calling HMRC and being put on the”hot seat” doesn't sound appealing to you we could handle it for you. The benefit that we offer over doing it yourself is that we will work with you to do some financial forecasting so we'll be equipped with the information needed to propose more viable terms to HMRC. In addition, as licensed insolvency practitioners we have extensive experience in these matters and have a high rate of success in helping our clients avoid winding up and tax penalties. Email us or call us on 0800 644 6080 for free advice.

3. Utilise Asset Financing to Raise the Funds Needed

Have you tried using some of your assets (i.e. - equipment, inventory, company vehicles, property, unpaid invoices) as leverage to obtain secured financing? If your clients are other companies and they have a reliable history of paying you in full and on time you may be able to use invoice discounting or factoring to get an advance on those invoices and use the funds to pay HMRC.

4. Propose a Company Voluntary Arrangement (CVA)

A company voluntary arrangement (CVA) is an agreement between your company and its creditors (including HMRC) that allows for lower monthly payments and a centralised payment for all of your unsecured debts. If approved would be an effective way to protect you company from legal action being taken by HMRC or any other creditor. You would need to instruct an insolvency practitioner to draft the CVA and propose it on your behalf. This solution is recommended if you have multiple creditors that you're trying to restructure.

5. Enter into Administration

If it seems as though HMRC may be moving to wind up your company soon it may be best to go ahead and enter into company administration, which is a formal insolvency procedure in which the directors of your company would appoint an insolvency practitioner to serve as the administrator of the business with the goal of facilitating a recovery.

6. Arrange a Pre-Packaged Administration Sale

If a recovery seems unlikely and you don't think the company will able to repay HMRC and all of its creditors, but you don't want to lose all of the company's assets and work in progress you may want to consider a pre-packaged administration sale, in which a third party or new company could arrange to purchase some or all of the assets.

Can You Be Held Personally Liable for the Debts Your Company Owes HMRC?

If you fail to cease trading and address your tax arrears while the company is insolvent it is possible that you could be held personally liable for some of the company's debts. Failure to pay National Insurance Contributions (NIC) could cause HMRC to send you a personal liability notice.

If the company eventually enters into liquidation (which is likely if you fail to pay your tax arrears) then allegations of wrongful trading may arise if its found that you continued to take new clients/job/orders and collect funds for products/services while the business was insolvent.

We have helped countless directors ease their concerns about tax arrears and arrange 'Time to Pay' plans with HMRC. For a free consultation send us an email or call us today on 0800 644 6080.


Keith Tully

Keith Tully

Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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