HMRC debt begins to build when a company can’t pay VAT, can’t pay PAYE or can’t pay corporation tax. These are often signs of insolvency.
The following details essential action for HMRC debt to manage the financial and legal penalties that go with late or missed payments.
1. Act early
Contact the HMRC. Even when only one payment of VAT, PAYE or corporation tax is late or has been missed.
2. Clear HMRC debt
To prevent accumulating fines, clear the HMRC debt if the company has the cash to do so.
3. Consider raising funds
Finance options: Invoice Factoring or Discounting, Asset Finance, Peer to Peer Lending.
4. HMRC Time To Pay arrangement (TTP)
After informal negotiations to establish a viable repayment figure, with a profitable company, HMRC debts are repaid with a HMRC Time To Pay Arrangement.
5. Pre-insolvency Moratorium
The pre-insolvency moratorium provides a breathing space from all creditor legal action for a period of 20 business days and can be extended without creditor consent whilst debt restructuring options are investigated
6. A Creditors Voluntary Arrangement (CVA)
A CVA can be proposed when a company is insolvent and unable to pay creditors (incl. HMRC). Licensed insolvency practitioners will help to draft a proposal for repayment to creditors, whilst the company can be protected from further action (e.g. winding up) via a moratorium.
7. Company Administration
For some insolvent companies an Administration is the optimal course of action. Creditors may not agree a CVA or there may be the threat of legal action against the company.
Administration protects a company from legal action, allowing time to restructure or arrange for a sale of the business or assets.
For professional advice on managing specific HMRC debt situations please do contact us. We are Licensed Insolvency Practitioners and we are always happy to help.
Download the HMRC Debt Management Guide.