What to do when your business owes money to HMRC. Understanding payment plans, time to pay arrangements, and your legal rights.
Tenable Support Team
Senior Business Advisor
Owing money to HMRC can be one of the most stressful situations for any business owner. However, understanding your options and rights can help you navigate this challenging period more effectively. This comprehensive guide will walk you through everything you need to know about dealing with HMRC debt.
HMRC debt typically includes unpaid Corporation Tax, VAT, PAYE, National Insurance contributions, and Construction Industry Scheme (CIS) deductions. When your business falls behind on these payments, HMRC has significant powers to recover the debt, but they also have a duty to work with businesses that are genuinely trying to resolve their tax affairs.
HMRC is often more flexible than many business owners realize. The key is to communicate early and honestly about your situation rather than ignoring the problem.
A Time to Pay (TTP) arrangement is an agreement with HMRC that allows you to pay your tax debt in installments over an agreed period. This can provide crucial breathing space for your business to recover while ensuring HMRC receives what they're owed.
Call HMRC's Business Payment Support Service:
0300 200 3835
Use HMRC's online service for debts under £30,000
Available 24/7
As a taxpayer, you have specific rights when dealing with HMRC. Understanding these rights can help protect your business and ensure fair treatment throughout the debt recovery process.
HMRC must treat you fairly and reasonably. They should consider your individual circumstances and work with you to find a solution.
You have the right to be represented by a qualified professional, such as an accountant or tax advisor.
HMRC should give you reasonable time to respond to correspondence and gather necessary information.
You can appeal HMRC decisions and have access to independent review processes if you disagree with their actions.
HMRC may agree to defer payment for a short period if you're experiencing temporary cash flow problems. This is typically for 1-3 months.
Best for: Short-term cash flow issues with expected resolution
In exceptional circumstances, HMRC may accept a reduced amount to settle the debt. This is rare and requires strong justification.
Best for: Businesses facing insolvency with limited assets
For larger debts, HMRC may agree to extended payment plans over 12 months or more, depending on your circumstances.
Best for: Substantial debts requiring longer-term solutions
Ignoring HMRC debt can lead to serious consequences:
Contact HMRC before they contact you. This demonstrates good faith and responsibility.
Have cash flow forecasts, business plans, and financial statements ready to support your case.
Keep up with ongoing tax obligations while negotiating payment of historical debt.
Propose payment plans you can actually afford to maintain long-term.
Consider engaging a tax advisor or insolvency practitioner for complex situations.
Keep records of all communications and agreements with HMRC.
Dealing with HMRC debt doesn't have to spell disaster for your business. By understanding your options, knowing your rights, and taking proactive steps, you can work with HMRC to find a solution that allows your business to continue operating while satisfying your tax obligations.
Remember, HMRC's primary goal is to collect the tax owed, not to close down viable businesses. If you approach them honestly and with a realistic plan, they are often willing to work with you to find a mutually acceptable solution.
Don't face HMRC alone. Our experienced team can help you navigate the process and negotiate the best possible outcome for your business.
HMRC debt can lead to liquidation. Understand the serious consequences:
Critical Liquidation Guide for DirectorsAlready in liquidation? We can still help with ongoing support and misfeasance claim advice.
Post-Liquidation Director Protection