What Happens If I Can’t Pay HMRC

It’s very important that if you are struggling to pay HMRC that you don’t bury your head in the sand and speak to them as soon as you can. If you don’t keep HMRC informed of your circumstances they will continue to chase you for the unpaid HMRC arrears. 

If you ignore letters the next step will be that an enforcement agent from HMRC visits your business premises or home address (if the business is registered at your home).

How will HMRC enforce the debts?

The most common ways that HMRC will enforce unpaid arrears are:

Fines-  If you don’t pay HMRC on time or build up arrears your business will face financial penalties and surcharges which can get quite severe. Interest is also charged on the fines and money owed. This can lead to a business getting further and further behind with HMRC 

Bailiffs and taking goods- If you do not contact HMRC to discuss your arrears and why you have not paid them, the next stage will be enforcement agents or bailiffs at your business premises or home address if that is where the business is registered. At your premises, the HMRC agents will make notes of any assets that they believe are owned by the business, this could be stock, machinery, plant, or vehicles, and come back to take them. Once taken HMRC will sell the goods to try and recover some of the money owed. In certain circumstances they may seize goods immediately or give you a controlled goods agreement order, this means HMRC now owns the goods and assets. You will then have 7 days to pay off your arrears or they will return to take the goods.

Winding Up Petition – If all other routes have failed the last step that HMRC will take is a winding-up petition. This is extremely serious and action from you must be taken ASAP. Once your business has been issued with a winding-up petition your business bank account will be frozen within a few days. If the debt is not cleared or restructured before the court date the business is forced into liquidation. This process is also known as a compulsory liquidation and should be avoided at all costs.


Burying your head in the sand when you owe HMRC money will only make matters worse. No matter whether your business owes VAT, PAYE, or Corporation Tax the advice we give to you is the same. Pick up the phone and talk to them. Letting HMRC know as soon as your business is starting to get into difficulties will help you negotiate and restructure your HMRC arrears.

Since the outbreak of Covid 19, HMRC enforcement action has been almost non-existent. This has left many directors building up large HMRC arrears with little or no enforcement action. Many business owners pay those that scream loudest and with not so much as a murmur from HMRC in the previous 18 months you can see why arrears have been building up

If you still have HMRC and have ignored letters from HMRC asking how you are going to pay then expect an enforcement agent at your door soon. HMRC has put it on record that their approach to enforcement currently is to work with businesses and help support them, but this approach can only go so far.

What to do if your business has HMRC arrears?

Right, you have probably read this post and it’s got you worried about HMRC bailiffs turning up at your business or worse your family home. All of this can be avoided by you taking some action and speaking with them.

You may want to consider setting up something called a Time To Pay Arrangement. This is where HMRC agrees to let your business pay the outstanding HMRC arrears over an extended period of time. Before the pandemic, a business would be given 12 months maximum to pay HMRC arrears over but recently we have seen HMRC approve time to pay arrangements over 24 and 36 months. You should be able to restructure your HMRC over 24 months with just a phone call to HMRC. Before you enter into any time-to-pay arrangement you need to be satisfied that the business is viable and your not just kicking the can down the road. It’s also important that your business is able to keep up with the Time To Pay Arrangement and be able to afford to make the payments.  Be aware that HMRC may suggest that you take out a loan to pay HMRC arrears, we always advise people not to do this.HMRC arrears are classed as an unsecured debt so if your business does not recover and needs to be placed into liquidation then the HMRC arrears are then written off. You may want to speak to one of our team at 1st Business Rescue before you make the call to HMRC so we can give you our view on how to deal with the specifics of your situation.

If you are unable to negotiate a Time To Pay Arrangement with HMRC your business may need to consider a more formal approach to restructuring its HMRC arrears. A company voluntary arrangement or CVA for short allows a business to formally restructure all unsecured debts over an extended period of time, typically 5 years. This procedure allows a business to continue trading while paying down legacy debt out of future profits. It’s important to take professional advice early when considering a CVA, you must check that a CVA is a right thing for your business and that the CVA has a high chance of being approved by your creditors. 

If your business can’t afford to pay anything it’s a sure sign of insolvency and sadly liquidation may be the best option for you and your business. In a liquidation, all business debts to HMRC including VAT, PAYE, and Corporation Tax are written off in the liquidation.  Voluntary liquidation can bring an end to this company and allow you a fresh start free from company debts.

If you need some advice on your specific situation please don’t hesitate to call us and we will offer you some free and independent advice, no strings and no obligation.

Before you call HMRC make sure that you have all your HMRC reference numbers, this will help speed the call-up and ensure that you can deal with all HMRC arrears in one phone call.

1st Business Rescue has a wealth of knowledge at negotiating with HMRC. We can help assist you in this process and offer free initial advice on your situation. If there is no hope of recovery for the business we can discuss your options when it comes to company closure and make sure that you understand your position in full so there are no hidden surprises down the line. All our initial advice is tailored to help you the director.

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