What Will HMRC Do About Late Or Non-Payment Of Tax?

Pressure From HMRC


If you are experiencing HMRC pressure regarding your company’s tax liabilities, be reassured to know that there are options available to help you through this stressful time.


HMRC hold considerable powers when it comes to recovering their debts. It is of no help to you that their systems quickly detect late payers. You may have become behind on payments due to a Covid related downturn in the market or suffered the loss of a major customer, or the ability to collect your own company’s debts on time.

If taxes are not paid because of these reasons other cash flow issues, then problems can spiral out of control. However, there are several positive steps you can take to manage the situation whether HMRC is putting on pressure for your Corporation Tax, PAYE or VAT arrears.

Our advice when it comes to HMRC pressure is to act quickly. If you fail to tell them about your situation, a successful outcome is more likely. However, Negotiations can be difficult if you do not understand how they operate or you are too close to the problem to see a way out. Debt Helpline can contact HMRC on your behalf. We have an excellent history of successful negotiations and offer various types of Business Debt Help.


What Will HMRC Do About Late Or Non-Payment Of Tax?

Here are some of the steps HMRC take to recover debt.

Warning Letters

A warning letter will be sent after the initial missed payment. These will become increasingly more threatening and will end with a Final Opportunity letter. If you cannot pay the outstanding amount, they may be willing to consider a Time to Pay arrangement (see below).

Send Enforcement Officers

If you fail to pay following the warning letters, you will receive a visit from an HMRC Field Agent known as an Enforcement Officer. HMRC enforcement officers, or field agents, have the right to force entry into your business premises as long as there is no residential element, and they have authority from a Justice of the Peace. These people have the authority to negotiate a repayment plan with you up to approximately £100,000.

Issue An Enforcement Notice

This gives you seven days in which to repay the debt in full, or negotiate a Time to Pay arrangement, after which you face seizure of non-essential business assets by bailiffs or HMRC enforcement officers. HMRC do not need a court order to do this. If the debt remains unpaid, HMRC will take enforcement action using the Taking Control of Goods Regulations.

Send Bailiffs

Bailiffs are not actually HMRC officers, but may be part of a bailiff firm appointed by HMRC to chase your debt. Their powers of seizure are limited, though they may lead you to believe otherwise.

Make An Inventory, seize, And Sell Business Assets

The Taking Control of Goods Regulations allows HMRC officers to enter your premises and list goods for potential sale to cover the debt, plus enforcement costs. The goods will remain on your premises but will be under the control of HMRC. They will be seized seven days later if you haven’t paid the debt, or negotiated a repayment plan.

Issue Court Action

HMRC may take various types of action depending on your situation, including:

  • County Court Judgments (CCJ) - You have 14 days to respond, after which you can request a further 14 days to arrange settlement of the company debts. If you fail to respond, or cannot repay, HMRC may issue a winding-up petition if your debts are greater than £750.
  • Statutory Demand - A formal request for payment to be made within 21 days or else challenged within 18 days, otherwise HMRC will petition for your company’s winding-up.

Serve A Security Bond Notice

This is a very serious step in recovering VAT or PAYE arrears meaning you must provide security to HMRC in the form of a bond. If not paid by the due date, it makes it a criminal offence to carry on trading. These are rarely a first course of action and are only sent when HMRC believe that you have deliberately avoided repayment, built up large amounts of debt, or failed to cooperate with them. Failure to pay can result in a fine of up to £5,000.

Send Winding-Up petition

If your company fails to pay a CCJ or statutory demand issued by HMRC, they will petition the courts for your winding-up. If successful, a winding-up order will be granted, forcing the company into liquidation.


Time To Pay (TTP) Arrangement

One solution to HMRC pressure is the Time To Pay arrangement, an agreement with HMRC that allows companies a revised tax payment schedule over a fixed period. HMRC must be satisfied that you will stick to this arrangement and repay all taxes in full over a period to be agreed. If your company debts are likely to take longer to pay, we can talk you through other recovery options that are more suited to your circumstances.

If it can be proven that your business may survive the current economic situation, there is a good chance HMRC will grant you extra time to make tax payments. They generally set a 6-12 month deadline but in some cases it can be longer.

This formal agreement with HMRC allows you extra time to pay your tax bill, with certain stipulations:

  • You must be completely honest with HMRC about your company’s financial position. If they suspect insolvency, or agree to an instalment plan only to discover later that you misled them, any arrangement will be cancelled and company liquidation may result.
  • HMRC prefer to be contacted prior to missed payments. Although arrears can be included within a Time to Pay arrangement, contacting them as soon as you foresee a problem shows a degree of financial control and honesty.
  • Time to Pay arrangements are only offered to companies temporarily unable to pay their company debts. If an instalment plan is agreed but you spend money on something other than your tax bill, you will be penalised.
  • Defaulting on a TTP can be disastrous, often leading to HMRC attempting to close the limited company to recoup its debt. This is why you need to ensure that no payments are missed or late for the entire term of the arrangement
  • An extended payment period of up to a year is possible TTP . Although the overall debt is not reduced, added time relieves some of the pressures.
  • If a TTP is agreed, interest will probably be charged on the amount payable. Penalties may be lifted if you make contact with HMRC quickly, and act responsibly to address your situation.

We Can Negotiate Time to Pay On Your Behalf

The idea of calling HMRC and being put on the spot during a tumultuous time for your business is unlikely to fill you with hope. However, we are accustomed to dealing with company debts and negotiations. By working with you we will first go through some financial forecasting to become equipped with the information needed to propose more viable terms to HMRC. As licensed insolvency practitioners we have a high rate of success in helping our clients with business debt and help avoid winding up and tax penalties.

Applying For a Time To Pay Arrangement

Once we have assessed your situation, together we will put together a strong case in favour of being granted extra time to pay. Debt helpline can negotiate on your behalf if you wish. We have an excellent history of successful negotiations and offer expert Business Debt Help.

What Constitutes A ‘Strong’ case?

We will help you present a realistic proposal in terms of what you can realistically afford to pay, backed up by evidence in the form of:

  • Sales and cash flow forecasts for the following six months or more
  • A plan of how you intend to cut costs to free up extra cash
  • Conveying your determination to meet repayments
REMEMBER: HMRC will want the TTP arrangement to be over in the shortest time, with the highest repayments possible. You must be careful, though, to offer only what you can afford. You must be certain that your company can meet its obligations as set out in the plan before it is agreed.

Dealing with HMRC can be problematic unless you understand how they operate, which is why many of our clients ask us to negotiate on their behalf.


Can I Be Held Personally Liable Company Debts

If you fail to cease trading and tackle your tax arrears while the company is insolvent, it is possible to be held personally liable for some of the company's debts. Failure to pay National Insurance Contributions (NIC) could cause HMRC to send you a personal liability notice.

If the company eventually enters into liquidation, then allegations of wrongful trading may arise if it's found that you continued to continue trading and collect funds while the business was insolvent.

We have helped countless directors address their concerns about tax arrears and arrange 'Time to Pay' plans with HMRC. Call us today on 0333 300 3490 for further guidance.

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