Kevin McLeod
Written By Kevin McLeod
Licensed Insolvency Practitioner
July 17th, 2023

All companies, whether large or small, will have to engage with HMRC throughout the course of their existence. It’s no surprise that HMRC is a frequent creditor of companies. When companies start to struggle financially, they are often in a position where they can’t pay HMRC as and when taxes become due.

HMRC Debt Advice

HMRC have a large body of resources that they can use to recover outstanding debts, so it is important to ensure that you engage with them and treat them as a priority. HMRC tax problems will only get worse if you don’t address them at the earliest possible stage.

Knowing at which stage you are at in the HMRC’s escalation process, if your company has accumulated tax arrears, will help you to take steps to address the issues any company indebted to HMRC will face. We have put together a guide to HMRC’s standard company debt recovery processes and steps you can take to help resolve the issues.

Do you need free, confidential advice?
Call us now on 0208 444 3400 or use the live chat to get immediate, expert advice from our team. We have decades of combined experience at dealing with and meditating substantial HMRC arrears.


How do I contact HMRC about debt management?

Contact HMRC Debt Management on 0300 200 3887 from 8am to 8pm during weekdays.

How can tax Debt be Resolved?

If you’re struggling with tax debt, you can negotiate time to pay, raise finance to pay your arrears, or choose voluntary liquidation and close your company down.

How far back can HMRC Claim Unpaid Tax?

In normal cases investigations will stretch back 4 years. This rises to 6 years in more serious cases and, where fraudulent behaviour is suspected, may go back 20 years.

How long will HMRC give me to pay?

If you’ve haven’t used a Time to Pay Arrangement already, HMRC will give you 12 months to pay what you owe them. In very rare cases, they can be persuaded to go beyond this but these examples are scarce.

Stages within the HMRC Debt Collection Process:

Stage One: HMRC Letters

Shortly after a company fails to pay its debt on time, HMRC will start sending a series of letters to let you know that the tax is overdue and may be subject to penalties for late payment.

If you are receiving these letters, speak to HMRC. If the failure to pay has arisen from temporary cash-flow problems, they may be willing to discuss the repayment of the tax over a longer period of time. These Time to Pay arrangements will halt the build up of further penalties and letters from HMRC as long as the company fulfils its obligations under the agreement. Make sure that you also pay any further taxes that become due on time to stop your HMRC tax arrears from building further.

Stage Two: HMRC Field Force Enforcement Agent Visit

If the letters do not result in the repayment of the tax or an agreement about how the tax will be repaid, HMRC will send an enforcement agent to the company’s premises. The enforcement agent will discuss the outstanding debt and methods for repayment.

Stage Three: Notice of Enforcement

If HMRC do not receive payment, they will issue a Notice of Enforcement. They then have to wait seven days before they can take any further action. After the seven day period has passed, they are entitled to seize certain assets of the company to sell and use the proceeds to repay the debt.

Stage Four: Legal Action

The next steps HMRC will take are to either issue a statutory demand or commence legal proceedings against the company in the County Court. Legal action will result in the Company being taken to court, while a statutory demand is the first stage in bringing a petition to wind up a company. Both are very serious steps that can have onerous consequences. HMRC may also contract a third-party debt collection agency in the case of legal action, which is likely to result in a significant number of communications to try and recover the debt.

The decision about which course to take will depend on the circumstances surrounding the debt, but they will look into the history of the debt, how long it has been outstanding and its total amount. In both cases, they will notify you of the action and give you a deadline to respond.

Stage Five: Tax Deposits and Bonds

If HMRC think there is a risk that you won’t pay future taxes and duties on time, they can ask for a deposit or a bond from the company using a Notice of Requirement. The Notice of Requirement shows the amount of the required deposit, when it is due and the ways in which you can make the payment. The amount of time that HMRC can keep the deposit depends on the tax but generally it is between 12-24 months.

Giving security to HMRC can be problematic for a number of reasons, not least because it requires the company to provide HMRC with security in the form named by the Notice of Requirement at a time when it is having financial difficulties. Additionally, the Notice of Requirement usually names the company’s directors or other individuals deemed appropriate alongside the company. This means that any directors or individuals named will have joint liability for the company’s tax debts and can be pursued for them personally.

It’s a criminal offence not give the full security named in the Notice of Requirement, plus you will be fined £5,000 if you trade after the date the security was due.

Stage Six: Winding Up Petition for Compulsory Liquidation

If the debt is for an amount over £750, HMRC can request a court hearing and serve a winding up petition on the company. You will normally have seven days to try and settle or negotiate with HMRC before they will advertise the petition in the London Gazette. Once the petition is advertised, other creditors of the company can use this petition to wind the company up as well.

You should be aware that once the petition has been served, you should not transfer or sell any of the company’s assets. The company accounts will also be frozen. At the court hearing, if the court decides that the company cannot repay the outstanding debt, it will issue a winding up order and a liquidator will be appointed to wind the company up and distribute its assets to the creditors.

Steps You Can Take

The biggest thing that you can do to minimise your difficulties, whichever stage you are at, is to engage with HMRC and keep them informed. Showing them that you are doing what you can to clear the company’s tax arrears and make any other tax payments that arise on time will put you in a better position when it comes to trying to negotiate repayment terms, helping to avoid legal action  simply or escalation to the next stage in the process.

If you are in the later stages, it may be better to speak to specialists such as AABRS to help you find solutions to the situation. We are experienced, both in liaising with HMRC to try and arrange solutions that will stop the situation from worsening and advising directors on courses of action available to them in light of their particular circumstances. We will also help you understand your obligations to other creditors i.e. keeping them informed if the company is insolvent.

Request a Time to Pay Arrangement

You can try and negotiate a Time to Pay arrangement with HMRC’s Business Payment Support Service. This essentially gives you more time to pay the tax debt. The best way to contact HMRC is over the phone – make sure that you have all relevant details to hand, such as the company details, why it’s having difficulty paying the debt in question and its predicted cash-flow for coming months. This will enable you to give them the information they will require to make a decision. You can call HMRC on 0300 200 3835.

Enter into a Company Voluntary Arrangement

In a Company Voluntary Arrangement (CVA), a company makes a proposal to its creditors offering to pay contributions from future profits or asset disposals. Repayment terms will be drafted to suit the needs of the company, so may be an immediate lump sum payment or over a longer period of time (generally up to five years). The benefit of a CVA is that it can be used for all the company’s unsecured creditors, so can be a powerful way of restructuring debt if this is something the company is struggling with. An insolvency practitioner such as AABRS will need to draft the CVA. If this is something that you would like to discuss, please contact us on 0208 444 3400 or by using our Contact Us form.

Put the Company into Administration

Administrations are aimed at helping companies that are likely to become insolvent to recover. Once an administrator has been appointed, he will need to either rescue the company and turn it into a going concern, repay creditors and give them a better return that they would have received in a liquidation or realise the company’s property to satisfy the company’s creditors.

Pre-Packaged Administration

In a pre-pack administration, the company will negotiate the sale of agreed assets to a third party prior to the administrator being appointed. Once the administrator is appointed, the sale normally happens very quickly. This can be a quick solution for companies on the brink of or in insolvency.

Cant Pay HMRC? Contact us for Advice

If your company owes HMRC tax arrears and is struggling to pay, call us on  0208 444 3400 or Contact Us.