HMRC Business Debt

When a business struggles, often tax liabilities such as PAYE, VAT and corporation tax can be neglected as they do not need to be paid immediately. However, when liabilities are due, they can often become the death knell for your business. Unfortunately, His Majesty’s Revenue and Customs (HMRC) are particularly aggressive as creditors.

This is what makes any HMRC liabilities ‘priority debts’. Depending on your conduct, you can even face legal penalties or be made personally liable for business debts.

However, there are options available if your business is struggling with HMRC liabilities. Increasingly, businesses are turning to borrowing as a short-term solution to HMRC arrears. This is the worst option available and will only serve to put your business into more unmanageable debt. A professional insolvency expert can help you control your tax arrears and keep your business running. Or, close your business in a controlled manner.

You Can’t Negotiate With HMRC

What makes HMRC different (and more difficult) than most creditors is that they don’t work for profit and therefore the ‘commercial’ aspect does not factor into their decision-making process.

As a result, they are much less likely to accept payment plans or reduced settlements. They are also far more likely to begin legal action and issue winding up petitions for companies.

So, it may be tempting to hold off on facing your HMRC liabilities. However, this could spell disaster for you and your business. As well as this, the longer you wait, the more penalties and fees you will incur, ultimately increasing the amount that you owe. Some of the most common and ‘dangerous’ HMRC debts include:

These liabilities can quickly pile up and may create a situation in which you have no way out other than formal insolvency procedures.

How Can HMRC Recover Debts?

HMRC can take the same action as any other creditor but, they are also granted additional legal powers to assist them in the recovery process. As mentioned, they are particularly aggressive so will not ‘hold back’ when it comes to recovering money owed. Some of the ways they do this include:

• County Court Judgements & Statutory Demands – Although slightly different, both of these are formal requests for payment and the precursor to forcing the liquidation of your business.
• Winding-up petition – This is a petition issued for the closure of your business. If you do not respond, a liquidator will be appointed, the assets sold and your conduct investigated.
• Distraint/Asset Repossession – HMRC can send bailiffs to repossess your company’s assets and sell them to pay your debt.
• Collection agencies – HMRC employ a number of very persistent debt collection companies to pursue debts on their behalf.
• Penalties – To deter non-compliance, HMRC has the ability to add late penalties and charges to your existing arrears. This can add a hefty sum to your liabilities.