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Written by

John A Waller


Reviewed September 10th, 2021

Can’t afford to pay HMRC demands

Companies throughout the UK can’t afford to pay HMRC demands when received. Many businesses and individuals are fearful or pursued by the HMRC for tax unpaid. However, many merely have no intention to pay and evade tax. Others are unable to pay. Sadly, tax is an important issue. Many simply are unable to handle the situation and fail to account. However, the tax must pay if due.

Accountants often tell stories about how shocked clients are when advised of their crown liability. They forget the tax due to profit or earnings, but somehow they spend it raising financial issues when payable.

We all expect it, but I’m confident. 

Running a business is not easy. Indeed, most people have no intention not to pay creditors and HMRC. However, stresses from trading creditors who can stop you from trading often are paid sooner than the HMRC. Provisions required to pay Vat leave directors exploring can’t pay VAT options and Corporation Tax due to trade creditor pressures. Issues also arise not paying monthly PAYE and NI. Suddenly, an HMRC demand arrives, and your cash flow does not allow payment. You then need to perform the action before matters spiral out of control. So what are you to do?

Those who account for the inevitable tax liability avoid such issues as:

  • Penalties for late payment;
  • Interest charged on unpaid tax.

However, those who fail to account for tax liabilities ‘run the gauntlet’. Not having the funds available to pay the tax liability, even if profitable, face the above and possible insolvency via HMRC, attempting to wind your company with a compulsory liquidation (Read What is a Compulsory Liquidation? &dealing with a winding-up petition.

Action required when you can’t pay HMRC.

So what should you do if you are in the latter situation? As one famous person said on a sitcom. ‘Do not panic! 

Establish immediate contact with the HMRC once collected, and explain your predicament. This may be contrary to how you feel. However, the HMRC will listen and help. Their job is to collect tax for the economy. However, many forget they are genuine human beings and remain, wherever possible, wanting to sort out your tax affairs with their cooperation and support. 

Once you have established a dialogue with the HMRC and advised of your inability to pay, the HMRC will consider your circumstances. At this stage, PLEASE remain in conversation with your case officer. The problem will not go away. Please note, being a company director of a limited company in England and Wales means you have to pay tax as and when due, and maintain records accurately reflecting any taxes owing.

Do not ignore any communications from the HMRC. The result is HMRC may commence an action to recover the debt, resulting in a Winding Up Order against your limited company, and even a bankruptcy proceeding against you for the personal debt.

The later situations are to be avoided if you can’t conclude an acceptable agreement.

If this happens, contact a licensed insolvency practitioner like the team at HBG Advisory.

An IP can offer support and licensed advice, explaining the options available for your situation. You must act once you are aware of your case, as this will help the IP assist you and your company’s financial position.

Seeking advice when you can’t pay HMRC.

Seeking advice does not mean your limited company is insolvent. However, the guidance offers recovery for a viable company.

HBG Advisory has supported many businesses throughout the UK, and directors as individuals who struggle to pay tax. Please contact us and let a member of our team explain how we help and ease your mind. Please call us on 0800 612 5448

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