HMRC will not write off a company's outstanding tax debts unless it enters into formal insolvency proceedings. Insolvency proceedings could include liquidation, or an attempt at restructuring and/or refinancing by way of administration or a Company Voluntary Arrangement (CVA).
You may be able to negotiate further time to pay your HMRC liabilities under a Time to Pay plan but this will not write off any of the debt you owe.
Can a limited company write off tax arrears owed to HMRC?
If your company is struggling to pay its tax bills, you are far from alone. HMRC's total tax debt stood at £42.8 billion as of March 2025, with over 913,000 taxpayers on Time to Pay arrangements (HMRC Annual Report and Accounts 2024–25). HMRC is the single largest creditor in the majority of company insolvencies, and facing a bill for VAT, PAYE, Corporation Tax, or National Insurance contributions that you cannot pay is one of the most common reasons directors contact us.
The short answer is that HMRC debts can be dealt with, and in some circumstances partially or fully written off, but only through specific routes. Your options depend on whether the business is viable and can continue trading, or whether it needs to be closed. As licensed insolvency practitioners, we negotiate with HMRC on behalf of directors every day and can help you understand which route is right for your situation.
Which routes can lead to HMRC debt being written off?
HMRC will not simply agree to write off tax debts because your company is struggling. The only circumstances in which HMRC debt can be partially or fully written off are through a formal insolvency procedure. There are two main routes we can consider
Write off HMRC debts using a Company Voluntary Arrangement (CVA)
A Company Voluntary Arrangement (CVA) allows your company to continue trading while repaying a proportion of what it owes to creditors, including HMRC, over a period of three to five years. Any debt that remains at the end of the CVA term may be written off. HMRC will generally support a CVA if they believe it will deliver a better return than liquidation and they believe the business has a genuine chance of survival. A CVA must be proposed by a licensed insolvency practitioner and requires at least 75% of creditors by value to vote in favour.
Write off HMRC debts using a Creditors' Voluntary Liquidation (CVL)
If the business is no longer viable, a Creditors' Voluntary Liquidation (CVL) is the most common route for closing an insolvent company. The liquidator will sell the company's assets and distribute the proceeds to creditors in a strict order of priority. Any HMRC debt that cannot be repaid from the proceeds will remain with the company meaning that once the company is dissolved, those debts are effectively written off.
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Can Time to Pay arrangements be used to write off HMRC debt?
A Time to Pay arrangement allows you to spread your HMRC debt over a period of typically up to 12 months. However, a TTP does not write off any of the debt meaning you will still need to repay everything you owe. A TTP may be the right option if your company is experiencing short-term cash flow difficulties rather than fundamental insolvency, but it will not reduce the total amount owed.
Key takeaways
• HMRC will not write off tax debts simply because your company is struggling. A formal insolvency procedure is required if you want to write off money owed to HMRC. • A CVA may allow you to continue trading while repaying a proportion of what you owe, with remaining debt written off at the end of the arrangement. If the business is no longer viable, a CVL will close the company and any HMRC debt that cannot be repaid from assets is effectively written off on dissolution. • A Time to Pay arrangement can provide breathing space but does not reduce the total amount owed. • Directors are not usually personally liable for company tax debts, but personal liability notices and personal guarantees are important exceptions. • As licensed insolvency practitioners, Real Business Rescue negotiates with HMRC on behalf of directors every day. Contact us for free, confidential advice.
If you’re struggling to pay a tax bill, the best thing you can do is to take control of the situation by taking early action. At Real Business Rescue, we have a proven record of resolving tax debts and negotiating with HMRC and can arrange a free consultation to help you understand your options.
Shaun is a Partner Real Business Rescue specialising in supporting SME directors in financial distress and helping them understand their options. Shaun has over 30 years' experience in guiding directors through CVL, MVL, and business recovery processes. Shaun holds the Certificate of Proficiency in Insolvency (CPI).
Partner, Real Business Rescue
Can HMRC pursue me personally for my company's tax debts?
Generally, no. As a director of a limited company, you benefit from limited liability, which means HMRC cannot normally pursue you personally for the company's unpaid tax. However, there are exceptions. If HMRC has issued a personal liability notice, for example, you could be held personally responsible. Personal liability can also arise if you have been involved in wrongful or fraudulent trading.
Will HMRC accept a partial write-off through a CVA?
HMRC will consider supporting a CVA if the proposal demonstrates that creditors will receive a better return than they would in a liquidation. There is no guarantee that HMRC will accept a write-off, but in practice they often do where the business is viable and the repayment plan is realistic. Your insolvency practitioner will negotiate directly with HMRC on your behalf.
Does liquidation write off all HMRC debt?
Any HMRC debt that cannot be repaid from the sale of company assets will remain with the company. Once the company is dissolved, those debts are effectively written off and HMRC cannot pursue the company further. However, debts secured by a personal guarantee or a personal liability notice will survive the liquidation and can still be pursued against you as an individual.
Can I strike off my company to avoid paying HMRC?
Striking off a company with outstanding HMRC debts is not advisable. HMRC can object to the strike-off application, and even if the company is dissolved, HMRC has the power to apply to have it restored to the Companies House register for up to six years or up to 20 years if fraud is suspected. A formal insolvency procedure such as a CVL is the proper way to deal with HMRC debts you cannot pay.
Still unsure whether liquidation is right for your company? Don't worry, the experts at Real Business Rescue are here to help. Our licensed insolvency practitioners will take the time to understand the problems your company is facing before recommending the best course of action going forward based on your own unique circumstances.
We provide free confidential advice with absolutely no obligation. Our expert and non-judgemental team are ready to assist directors and stakeholders today.
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