HMRC Tax Arrears

There are a significant number of businesses in HMRC tax arrears, a proportion of who have acted proactively and entered into a payment plan to bring their tax arrears under control. It is important to act quickly when tax arrears come to light, take advice and contact HMRC before matters escalate.

There are times when tax arrears may occur due to a miscalculation by HMRC where the wrong amount of tax is charged. If you establish this to be the case again it is important to contact HMRC as soon as possible.

Dealing with HMRC tax Arrears

HMRC will vigorously pursue tax arrears so ignoring the problem is not a realistic solution. Understanding the reasons for the arrears is an important first step. You should then be in a position to determine whether the business has the capacity to pay the arrears. An approach can then be made to HMRC business support unit to discuss the realistic options available based on business income, expenditure, assets and the steps proposed to get the business tax position in order.

Possible options available to businesses in tax arrears are:

Pay off company debts

Whilst a solution available is to merely pay any existing tax arrears this is reliant on either the company having available capital to do so or being in a position to raise additional capital via other means such as:

  • Business overdrafts/Loans
  • Factoring/Discounting
  • Asset Refinance
  • Trade Finance

Time to Pay Arrangement (TTP)

A TTP involves agreeing with HMRC a revised payment over a scheduled period to bring the tax arrears up to date. They are based on the ability to pay, typically for a period of less than 12 months.

Company Voluntary Arrangement (CVA)

A CVA is an arrangement between an insolvent company and its creditors allowing the company to pay off its creditors over a specified period. The majority of creditors voting on the proposals must accept and the company must be able to demonstrate that creditors can be paid from future trading. HMRC take an active view on CVA proposals submitted and are often a large creditor whose decision is a key to their acceptance.


An administration order comes into force when a company is under severe financial difficulties requiring an administrator to either protect and assist in the running of a business or ensure enhanced realisations are generated from any business/asset sale.

It is important to seek professional advice to find the most appropriate solution for your business.