What to do if you cannot pay your company's tax bill

Help for businesses unable to afford company taxes

With Employers’ National Insurance Contributions and National Living Wage increasing, more businesses are experiencing cash flow shortages, leaving them unable to afford their tax bills. If you cannot pay your company’s tax bill, seek professional insolvency advice to manage your tax debts and understand what tax help is available to your business.

What help is available for companies that can’t pay HMRC?

If you cannot afford to pay your HMRC tax bill, such as Corporation Tax, VAT, or PAYE arrears, support is available. If you require more time to pay your tax bill or clear existing HMRC debts, consider a Time to Pay (TTP) arrangement.

Time to Pay arrangement - A Time to Pay arrangement is a payment plan offered by HMRC to help businesses split their tax bill into affordable monthly instalments. A Time to Pay arrangement helps businesses clear their tax debts as quickly and efficiently as possible.

If your tax debts are growing and you expect to miss upcoming payments, a Time to Pay arrangement can help you get your tax debts under control. A TTP arrangement also demonstrates to HMRC that you’re working towards settling your tax debts which can help reduce creditor pressure.

To qualify for an HMRC Time to Pay arrangement, you must propose monthly repayments that you can realistically fulfil. If HMRC believes that you won’t be able to afford the proposed monthly repayments, they will reject the Time to Pay arrangement.

Read our full guide on Time to Pay arrangements, including how to set up a TTP arrangement, Time to Pay arrangement terms and what happens if you fail to keep up with a TTP arrangement.

Company Voluntary Arrangement (CVA) – If you are struggling to pay debts to creditors, including HMRC, you may consider a Company Voluntary Arrangement. A CVA is a legally binding repayment plan that includes all company creditors, including HMRC.

If company debt is exclusive to HMRC, consider a Time to Pay arrangement. A CVA is a long-term arrangement that typically ranges between three to five years and is initiated by a licensed insolvency practitioner.

What happens if you ignore HMRC tax debts?

If you cannot afford to pay your tax bill, contact HMRC to request time to pay. HMRC will apply a late payment penalty and interest on late tax. If you ignore your HMRC tax bill, HMRC will contact you to address the missed payment. If you fail to respond or come to an arrangement, HMRC will escalate the matter which may involve:

• Collecting the debt through a debt collection agency
• Collecting the debt directly from your bank account or wages
• Selling your assets to raise funds
• Seeking court action
• Closing your company

This can be detrimental to your business, disrupt company operations, and severely damage your reputation. If you can’t pay HMRC and other creditors, seek immediate advice from a licensed insolvency practitioner to get your company finances into shape and come to an agreement with HMRC.

How can Real Business Rescue help if can’t pay your tax bill?

If you can’t pay your tax bill as your business is experiencing cash flow problems, get in touch with our business debt help experts. The Real Business Rescue team of licensed insolvency practitioners are well positioned to support company directors navigating HMRC tax arrears. To find out whether a Time to Pay arrangement or a Company Voluntary Arrangement is right for you, reach out to our friendly team.