What to do When Receiving a Winding up Petition for VAT or PAYE

Receiving a Winding up Petition for VAT or PAYE
Receiving a Winding up Petition for VAT or PAYE

A Winding Up Petition is a petition issued by an unpaid creditor that they intend to force the debtor company into liquidation. The unpaid creditor presents the petition to the courts. If the court agrees with the petition, they will make a winding up order that will force the company to be liquidated and wound up.

Do HMRC Issue Winding Up Petitions?

Yes, HMRC is the single biggest issuers of winding up petitions in England and Wales. They will normally use a winding up a petition where their normal debt recovery process has failed and the company will not or cannot fulfil its tax debts. HMRC issue winding up petitions about a wide range of taxes including VAT arrears and late PAYE.

Creditors can only bring winding up petitions in situations where the company owes them more than £750, and they can prove that the company can’t pay them. So HMRC will not be able to bring a winding up petition and force your company into insolvency if it owes them less than £750.

What Should I do if I Have Received a Winding Up Petition from HMRC for unpaid VAT or PAYE?

The answer somewhat depends on how long it’s been since you received notice of the petition as it’s very hard to stop the process if more than seven days have elapsed since the petition has been issued.You will have more chance of stopping the petition from being successful if you act immediately.

The first and simplest solution is to pay HMRC the outstanding amount of VAT or PAYE immediately. If they’ve issued a winding up petition, HMRC is very serious about recovering their money, and the easiest way to stop the process is to pay them what they are due. If you can do this, you should note that you will also be expected to reimburse HMRC for their costs of bringing the winding up petition, which is likely to be an amount more than £1,000.

It’s unlikely that notice of the winding up petition would have come out of the blue – HMRC will have been through a lengthy debt recovery process, including the issue of a Statutory Demand. If you have not been able to pay the VAT or PAYE throughout this process, it’s unlikely that you will be able to pay the full amount when a winding up petition has been issued.

If you are in this situation, you should seek professional advice immediately. There are some options that you can take, but the viability of each will need to be determined for your company.

These options include putting the company into administration or creditors’ voluntary liquidation, negotiating a creditors’ voluntary arrangement or negotiating directly with HMRC so that they do not publicly advertise the petition (the advertisement normally leads to the company’s bank account being frozen and alerts other creditors to the company’s position). You may be able to arrange a Time to Pay agreement with HMRC, but this is very unlikely at this stage in the debt collection process.

Need some Advice?

If you have received a winding up petition, you should understand that it is imperative that you act immediately. If you don’t, it is likely that your company will be liquidated. For advice, please call Simon Renshaw on 0208 444 2000 for a no obligation chat or email sr@aabrs.com.

Written by: Simon Renshaw