My Business Can't Pay HMRC Debt | The Directors Helpline

What Happens If My Business Can't Pay HMRC?

If your Limited Company is having difficulty paying HMRC, you may be wondering what the consequences might be. Failing to pay your taxes can have serious repercussions, including legal action, penalties, and even the closure of your business. It's important to act quickly to address the issue before it escalates.

The Directors' Helpline can provide help with HMRC pressure if you're facing debt problems. If you’re not ready to speak to us directly, you can take our Business Health Check for a free, confidential overview of your company’s position and potential risks. Alternatively, you can call our team directly, and we’ll provide tailored guidance for you and your business, as well as support negotiating with HMRC.

Can HMRC Close My Business?

HMRC can petition for a Compulsory Liquidation (Winding Up Petition) to force your business to close if you've failed to pay your tax bill. This is a severe consequence that can have a devastating impact on your business and its reputation. However, it's worth noting that HMRC will usually only take this action as a last resort, after other options have been exhausted.

However, if the company has assets then sometimes a HMRC field officer will visit and can distrain on these assets, uplift them and sell them to offset against the debt.

Our team can provide expert advice and support to help you if you're having difficulty paying HMRC debts.

Is It Possible to Write Off Business HMRC Debt?

Business HMRC debt cannot simply be written off because a company is struggling to pay it. In most cases, the debt remains payable unless it is dealt with through a formal insolvency procedure, such as liquidation. Whether this is the most appropriate route will depend on your company's individual circumstances.

If your company is unable to pay its HMRC liabilities, it's important to understand the full financial picture before making any decisions. Factors such as your company's assets, cash flow, other creditors and future viability will all influence the most appropriate course of action. A formal insolvency procedure may be appropriate in some cases, but it is only one of a number of possible routes.

Many directors assume that unpaid HMRC debt automatically means they have to close their business, but that isn't always the case. Before considering liquidation, it's important to understand your company's financial position and whether there are any alternative solutions available. If liquidation does prove to be the most appropriate option, any remaining HMRC debt may be written off as part of that formal insolvency process.

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How to close a company with HMRC debt

If you're considering closing your limited company but have outstanding HMRC debt or other liabilities that the business cannot afford to repay, it's important to understand your legal responsibilities before taking any action. The most appropriate way to close a company will depend on its financial position, so seeking guidance at an early stage can help you make informed decisions.

Where a company is insolvent, a Creditors' Voluntary Liquidation (CVL) is often the appropriate procedure for bringing the business to a close. During the liquidation process, company assets are realised and distributed to creditors in accordance with insolvency legislation. Any remaining unsecured debts, including HMRC debt where applicable, are typically written off when the liquidation has been completed, although secured debts and personal guarantees may still remain the responsibility of the guarantor.

As a company director, you have legal duties when a business becomes insolvent, including acting in the best interests of creditors. At The Directors Helpline, we'll help you understand your position, explain the process clearly and, if liquidation is the right option, support you throughout the journey while working alongside a licensed insolvency practitioner.

Am I Personally Liable for Business HMRC Debt?

In most cases, no. As a limited company is a separate legal entity, HMRC debt belongs to the company rather than the director. However, there are exceptions, and in certain circumstances HMRC can pursue a director personally, for example where there has been deliberate or fraudulent non-payment of certain tax liabilities.

It's important to understand your responsibilities as a company director before taking any action. If you're concerned about HMRC debt or are unsure whether you could be personally liable, our team can help you understand your position, explain the rules and discuss the most appropriate next steps based on your individual circumstances.

Can HMRC Chase a Dissolved Company?

If your company has been dissolved and still has outstanding HMRC debt, it's not necessarily the end of the matter. While dissolution is a process typically used for solvent companies with no debts, it's not the correct process for insolvent companies or those with HMRC debt.

This means HMRC could still chase a dissolved company by reinstating it and then placing it into liquidation - which is a formal process that would trigger an investigation into the company and Director’s affairs that led it to becoming insolvent. HMRC could go back up to six years after the date of dissolution (or up to 20 years if there are allegations of serious fraud or negligence).

If you're facing HMRC debt issues, it's important to seek professional advice. The Directors' Helpline can provide expert guidance on how to deal with HMRC in these circumstances.

Can HMRC Chase a Liquidated Company?

Once a company has entered liquidation, any debts owed to HMRC form part of the liquidation process alongside the company's other creditors. The appointed licensed insolvency practitioner is responsible for dealing with the company's affairs, realising any assets and carrying out the required investigations into the company's conduct.

In some circumstances, HMRC may decide that a company should be wound up by the court rather than through a voluntary liquidation. This is known as a compulsory liquidation and is typically reserved for cases where HMRC believes it is in the public interest. In these situations, an Official Receiver will initially be appointed to oversee the process.

Frequently Asked Question

Have a question? We're here to help!

What is considered HMRC debt?

Company debts to HM Revenue and Customs (HMRC) can arise from a range of taxes, including corporation tax, VAT, PAYE, and National Insurance contributions. These debts can often be one of the main causes of financial problems for UK businesses.

It's important for businesses to address HMRC debt issues as soon as possible to avoid these consequences. The Directors' Helpline can provide guidance on how to deal with HMRC debt and help you find a solution that works for you and your company.
Can HMRC Check Business Bank Accounts?

HMRC has the power to inspect business bank accounts in certain circumstances. This can happen if they suspect that you're not paying the correct amount of tax or if you're involved in other fraudulent activities.

If you're concerned about HMRC checking your business bank accounts, it's important to seek professional advice. The Directors' Helpline can provide guidance on how to protect your business and ensure that you're complying with HMRC regulations.
What Is a Time to Pay Arrangement? And How Do I Apply?

A Time to Pay (TTP) arrangement is a formal agreement with HMRC that allows you to pay your tax debt over a longer period. However, it's important to note that a TTP is not a solution for all businesses. HMRC will only grant a Time To Pay arrangement if they believe that you can realistically pay off the debt within the agreed timeframe.

To apply for a TTP arrangement, you need to contact HMRC directly. Time To Pay Arrangements are usually made over the phone with HMRC. During the phone call, you will be asked a few questions regarding your company. This includes the circumstances which have led to your company being unable to pay its outstanding bill, and to state what you can afford to pay on a monthly basis. You can call HMRC on 0300 200 3300.
Can HMRC Come to My House?

Yes, HMRC has the authority to visit your business premises, and if your home address is the registered address on Companies House, they could come to your home. The purpose of a HMRC visit is to inspect your records or investigate suspected tax fraud. However, such a visit is usually a last resort after other measures have been exhausted.

If you're worried about an HMRC visit to your home, it's recommended that you seek professional advice. The Directors' Helpline can provide guidance on how to prepare for an HMRC visit and ensure that you're complying with HMRC regulations.
How Long Does Business HMRC Debt Last?
HMRC can persist for a considerable amount of time if the debt is left unresolved. HMRC can be very aggressive and have the authority to pursue debts up to 20 years old, so there's no chance of them forgetting what is owed. Failure to address the debt in a timely manner can result in legal action, with HMRC having the power to:
- seize assets
- take court action
- pass the debt to a debt collection agency
- initiate Compulsory Liquidation
To avoid such consequences, it's crucial to deal with the debt issue promptly. Seeking professional advice from The Directors' Helpline can help you navigate the situation and find a solution that works for your business.