What to do if your business is in arrears with HMRC

Falling behind on taxes is more common than people think and it can be a big source of worry for businesses. Whether it’s VAT, PAYE, corporation tax or other payments, having arrears with HMRC is not the end of the world but it does need prompt action. Here’s what businesses need to know and do when they owe HMRC.

What are the first steps a business should take if they find themselves in arrears with HMRC?

If you’re in arrears, don’t bury your head in the sand. The first step is to get in touch with HMRC as soon as possible. The worst thing you can do is ignore the issue as it will escalate quickly with penalties and interest added. Contact HMRC to explain your situation and, if needed, seek advice from a tax expert or financial advisor who understands the system. Most of the time, HMRC is willing to work with you to find a solution – especially if you show you’re making an effort to sort things out.

How can businesses negotiate a time to pay arrangement (TTP) with HMRC?

A time to pay arrangement is one of the most common ways to deal with arrears. It’s an agreement where you pay what you owe in instalments rather than all at once. To apply, you’ll need to speak to HMRC and provide details about your finances and why you can’t pay in full. Be prepared with accurate information and a clear plan of how you can pay the debt back. If HMRC agrees, you’ll be able to spread payments over a longer period, easing pressure on your cash flow.

What happens if a business ignores HMRC arrears or deadlines?

Ignoring HMRC is not an option. If you miss deadlines or fail to arrange a payment plan, HMRC will take action. This could involve sending debt collectors, freezing your bank accounts or even starting legal proceedings like issuing a winding-up petition. The longer you leave it, the more serious it gets. Staying on top of communication with HMRC can stop things from escalating and acting early shows you’re serious about finding a solution.

How should a business prepare for an HMRC field force visit or asset seizure threat?

If HMRC sends field force agents to visit your business, they’re coming to collect the debt or seize assets. Before it gets to this point, try to resolve the issue by arranging a payment plan. If a visit is unavoidable, don’t panic. Make sure you’re present, remain polite and keep records of the visit. If HMRC plans to seize assets, it must give you notice. Take that time to contact HMRC and offer a payment solution or get professional help to challenge the decision if necessary.

What are the potential consequences of receiving a winding-up petition from HMRC?

A winding-up petition is one of the most serious actions HMRC can take, leading to the forced closure of your business. If you receive one, act fast. You have seven days to challenge it before it’s advertised in The Gazette, which can damage your reputation and cut off credit from suppliers. Your options include paying the debt in full, negotiating a time to pay arrangement or disputing the debt if you believe it’s wrong. Seek legal advice immediately if you’re in this situation.

 What support options are available for businesses struggling with tax arrears?

If you’re facing tax arrears, there’s plenty of help available – and this includes from financial advisors and tax specialists to brokers who help find funding for your business.  If you need help with cash flow, the obvious solution might be invoice finance or a short-term business loan.  It’s vital to act early and get the right advice as soon as you can.  The longer you leave it, the bigger the problem may end up being.

Don’t let tax arrears take over your business – take action, talk to HMRC and explore the solutions available to you.

If you’d like to learn more about the help available, please contact Stef Radymski or Nilima Begum.  Our team is ready to help you navigate the process, answer any questions you have and find the best financing solution to support your business’s financial health.