If you can’t pay HMRC, what are your options?

If you owe money to the HMRC and are having trouble repaying it, you may be searching to find out if – and how – your debt could be delayed or maybe written off altogether. Facing a bill for taxes that you cannot pay is often both stressful and confusing. But just what are your options if you have tax arrears?

Can I have debts to HMRC written off?

The only option to write off your debts to HMRC is to enter a formal insolvency procedure. This is a serious step and a decision that cannot be taken lightly. Before settling on any course of action, you must consult a licensed insolvency practitioner, who will oversee any insolvency process you enter. It’s our role to advise you on the best course of action.

However, first you might want to investigate a ‘time to pay’ arrangement with HMRC. This is an informal process where you agree with HMRC spreading your tax liabilities over a longer period of time.

The next step from an informal arrangement is a Company Voluntary Arrangement (CVA). This is a formal insolvency process which might be an option for you to spread out payments and / or reduce them.

In a CVA, you have the chance to negotiate with HMRC, to reduce some of your debt in exchange for agreeing reasonable repayment terms as well as pay over a longer period of time.

If your business would be financially viable without its debts, and if you can work with a licensed insolvency practitioner to create a practical, achievable business plan that shows how you’ll get back into profit, you could use a CVA to make your debts more manageable.

A CVA allows creditors (including HMRC) to recover some or all of what they’re owed while you remain in control of your company’s assets. HMRC will only be inclined to accept if they think your company has more chance of repaying its debts using a CVA rather than a liquidation.

It is very important to only make arrangements with HMRC, whether formally or informally, that you are sure you can honor. Otherwise, you could find HMRC forcing you down the liquidation route without you being in control of the process.

Is liquidation an option?

If your business is not viable long-term, you might need to consider a company liquidation using a Creditors’ Voluntary Liquidation (CVL).

In this case, any debt stays with your company and is partially paid by selling any assets your company owns. The rest is effectively written off. However, when a business goes into liquidation with unpaid tax bills there is always some risk.

For example, have you given a personal guarantee to HMRC (known as a Personal Liability Notice) for your business’ tax debts? The licensed insolvency practitioner overseeing your CVL is also legally obliged to investigate the causes of insolvency. If they discover that your actions have led to the business’ failure, or if you’ve been involved in wrongful trading, the debts to HMRC might become yours to pay.

Are you worried about a bill to HMRC that you can’t pay?

If you’re having trouble paying your tax or other liabilities, the first step is to contact us as soon as possible. As licensed insolvency practitioners and business rescue experts, we’re best placed to advise you on your options, and to help you negotiate with HMRC and your other creditors.

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