One of the most common creditors of a business is HM Revenue & Customs.

The late or non-payment of taxes, PAYE, National Insurance, VAT and Corporation Tax could be a major indicator of businesses insolvent status and HMRC will certainly begin to have similar suspicions. It is likely that if HMRC suspect a company of being insolvent they will increase their scrutiny of it.

Firstly if a business is insolvent (unable to pay their debts as and when they fall due, including to HMRC) the director needs to carefully consider their actions. Continuing to trade while insolvent could lead to accusations of wrongful trading in the future in which directors could become personally liable for the debts of the business.

In the first instance it is best to seek advice from a licenced insolvency practitioner such as ourselves. This act should go some way to satisfying creditors that the directors are taking the most appropriate course of action to protect creditor interests and rectify the insolvent situation.

HMRC can decide to pursue a company for unpaid tax by sending enforcement officers to seize company assets that will be used to pay off the debt. They can also seek to issue a Winding Up Order to place the business into forced liquidation in order to recover the debt.

It’s always best to tackle any issues of unpaid tax etc. as soon as they arise rather than letting them get out of hand and risk the loss of the company.

There are several solutions to HMRC debt with which we can assist:

Time to Pay arrangement

If payment to HMRC has become a problem for a business then the first and most important step, as with any creditor, is to make contact to explain the situation and attempt negotiation to resolve the problem.

Time to pay is an arrangement negotiated with HMRC to extend the period in which the business has to settle its current debt. This could be anywhere from 6-12 months but could be longer is some circumstances. HMRC will want to be assured that this course of action is achievable for the business and that it can make the payments it has agreed and recover for any current financial troubles.

This type of arrangement can be negotiated by the directors themselves. If assistance is required then a licenced insolvency practitioner can offer advice and maybe negotiate on the business’s behalf.


The use of finance can be a valuable tool to help avoid a late or non-payment to HMRC. If the business has assets such as tools, machinery, vehicles etc. or maybe long standing business customers with a history of full and prompt payment on invoices then asset or invoice finance might be something to consider. It can allow the business the get an ‘advance’ on invoices and make the most of value of their equipment in order to raise funds that are needed now.


If a business is doing well currently (or could do well with some restructuring) but has suffered with previous periods of bad cash flow and unpaid debts that it cannot now catch up with then a CVA might be a viable option. A CVA must be proposed by a licensed insolvency practitioner and can offer the breathing space a business needs to get back on its feet and thrive. The business must have a surplus available each month to pay into the arrangement and if the majority (by value) of the company’s creditors agree to the terms all will be legally bound by them. The business will make one affordable monthly payment to cover all their debts including HMRC with the rest being legally written off when the CVA is brought to a close.


If the situation is looking like HMRC may be moving to wind a company up or take other serious action and a CVA is not an option it may be possible to place the business into administration. Administration is a legal process that appoints an insolvency practitioner to administrate the business with a view to its recovery.

Dealing with HMRC debts can be a daunting prospect for any business. We are able to offer free and impartial advice and assistance when dealing with debts to HMRC.

If you would like to discuss anything mentioned in this blog for yourself or a client or want more information on any of the solutions above then please do not hesitate to get in touch. Call on 01257 257030 or email