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Managing HMRC arrears - what company directors need to know
We’re here to help you, the Director.
At 1st Business Rescue we have over 50 years of experience providing insolvency, liquidation and company debt advice to business owners.
We understand how challenging it can be when dealing with financial difficulties within your business. It’s easy to ignore the problem and hope that it disappears, but this is often the worst thing you can do.
Our dedicated team is here to provide honest, valuable advice to help UK company directors.
No case or circumstance is the same, but I can guarantee that my team and I are here to give you the best advice.
We are one of the only 5-star business insolvency companies on Trustpilot and Google, with 100’s of 5-star reviews.
Contact our friendly team for a 100% confidential, no-obligation consultation today.
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Facing HMRC pressure over VAT arrears?
Unfortunately, the reality is that as long as your company remains operational, HMRC will continue to pursue you.
This can be an incredibly stressful and overwhelming experience, especially when faced with demands for money you simply don’t have.
For you, your family, and your future, it’s an undeniably challenging time. That’s where we come in.
Our team specialises in managing HMRC issues and guiding companies through the process of closing down in the most advantageous way possible.
It is advisable to speak with an expert in this field to help you properly navigate your way through the company’s challenges.
We’ll help you navigate your VAT debt struggles
Lots of small business owners seem to be scared of the HMRC and put off speaking to them until they have a HMRC bailiff at the door. This is a mistake and just adds to the stress and anxiety that you may be feeling.
If you have unpaid tax bills to HMRC and you can’t pay them then you might want to consider a Time To Pay Arrangement. Businesses of all shapes and sizes across the UK are experiencing cash flow difficulties right now and Time To Pay arrangements are being offered to many businesses.
It is advisable to speak with an expert in this field to help you properly navigate your way through the company’s challenges.
Our focus is on you, the director - not your creditors.
We completely understand the emotional anguish company directors like you face when considering the future of your company – and the knock-on impact this can have on your personal life.
Our expert team will outline all of your options in a jargon-free, easy-to-understand way and advise you and your business on the best route forward – with the goal of protecting you and your personal assets.
Contact us for a confidential, no-obligation conversation.
VAT debt and arrears - Frequently Asked Questions
In most cases, no. A Limited Company is a separate legal entity, and the tax debt belongs to the business. However, you can become personally liable if:
● Wrongful Trading: You keep trading and racking up debt while knowing the company has no realistic chance of avoiding liquidation.
● Illegal Dividends: You took dividends when the company wasn’t actually making a profit (because it owed tax).
● Preference Payments: You paid back a director’s loan or a “friendly” creditor instead of HMRC.
● Personal Liability Notices (PLNs): While more common for NI, HMRC can “pierce the corporate veil” if they suspect fraud or deliberate neglect.
While you can start a new business, “striking off” a company with tax debts is very difficult. HMRC monitors the London Gazette for strike-off applications. If they see you owe them money, they will object to the strike-off, keeping the company active so they can pursue it for the debt or force it into liquidation.
A TTP is a formal agreement that allows you to pay your tax arrears in monthly installments, usually over 6 to 12 months.
● Pros: Stops legal action, prevents further late payment penalties, and protects your credit rating.
● Cons: You will still pay interest on the debt (HMRC’s rates are currently high), and you must be perfect with all future tax filings and payments.
HMRC will put you through a “viability test.” You need to be ready to answer:
● Is the business viable? Why did you fall behind, and why won’t it happen again?
● Can you raise money elsewhere? They will ask if you can get a bank loan or use a credit card. As noted in the screenshots, if you truly cannot, your answer is: “No, I have exhausted all other avenues for credit.”
● Have your references ready: You’ll need your 10-digit Unique Taxpayer Reference (UTR) and specific debt reference numbers handy before calling.
The arrangement will likely default immediately. HMRC is generally “one strike and you’re out” with TTPs. If you know you’re going to miss a payment, call them before it happens. They are far more likely to be flexible if you are proactive rather than reactive.
This is a final warning. If you receive this, HMRC has passed your debt to their enforcement officers (bailiffs). They have the power to visit your business premises to seize assets to sell at auction.
Yes. If your debt is over £750, HMRC can issue a Winding Up Petition. This is the “nuclear option.” Once this is advertised in the Gazette, your bank will likely freeze your company accounts, effectively killing the business overnight.
If the business is no longer viable and you can’t even afford a TTP, you are likely insolvent.
Don’t ignore it: As the screenshots suggest, communication is key.
You should speak to experts. They can help you enter a Creditors’ Voluntary Liquidation (CVL). This is a director-led process that proves you are acting responsibly, which is your best defense against personal liability.
We specialise in helping directors navigate these high-pressure moments. We offer:
● Free initial consultation that is 100% confidential
● We work for you – the Director
● Protect your personal assets
● Tailored plan unique to your situation