Can’t Pay Your HMRC Debt?
You Have More Options Than You Think.
When you owe HMRC money you can’t pay, it feels like there’s no way out. But “I can’t pay” doesn’t mean “I’m out of options.” There are several legitimate ways to deal with HMRC debt—and Femi knows them all from both sides.
Thousands of Businesses Face This Every Year
Tax debt builds up faster than most people expect. A difficult quarter leads to deferred VAT payments. Corporation Tax comes due before you’ve had time to prepare. PAYE falls behind during a cash flow crunch. Before you know it, the numbers feel insurmountable.
The stress is real. Sleepless nights, strained relationships, constant anxiety about the post and the phone. Many directors describe it as the loneliest feeling in business—carrying a weight they can’t share with employees or even family.
But here’s what you need to understand: “I can’t pay right now” is not the same as “I can never pay.” And HMRC, despite their reputation, would rather recover the debt over time than wind up your company for a fraction of what’s owed.
The Key Insight
HMRC’s primary goal is to collect revenue, not to destroy businesses. If you engage with them properly, demonstrate you’re taking the situation seriously, and present a credible plan, they will work with you. The worst thing you can do is ignore them.
Which Scenario Sounds Like You?
Different situations call for different solutions. Understanding where you are helps identify the right path forward.
“I can’t pay it all now, but I can pay over time”
Your business is fundamentally sound. Cash flow is tight but improving. You just need breathing room to clear the debt without killing the business.
“I don’t think the amount they’re claiming is right”
Payments haven’t been credited correctly. Assessments are based on estimates. Penalties seem excessive. You believe you owe less than HMRC says.
“I owe other creditors too, not just HMRC”
HMRC is part of a larger debt problem. Suppliers, landlords, loans— multiple creditors are all pressing. You need a comprehensive solution.
“HMRC has already taken legal action”
You’ve received a statutory demand or winding up petition. Time is critical. You need urgent intervention to stop enforcement.
“I don’t think the business can survive”
The debt is too large, the business isn’t viable, and you need to close down—but you want to do it properly and protect yourself.
“I’m not sure what I can afford”
You want to pay but don’t know what’s realistic. You need someone to help you understand your position and what’s actually possible.
How to Deal With HMRC Debt You Can’t Pay
Each option has different requirements, benefits, and implications. Here’s what you need to know.
Time to Pay Arrangement (TTP)
Spread the debt over 6-12+ months in manageable instalments
A Time to Pay arrangement is an agreement with HMRC to pay your debt in instalments over an agreed period. It’s their preferred solution for businesses that can’t pay immediately but can afford to clear the debt over time.
To get a TTP approved, you need to explain why you fell behind, provide evidence of your ability to make the proposed payments (typically cash flow forecasts), and commit to paying all future taxes on time. HMRC will generally agree to arrangements of up to 12 months, though longer periods are sometimes possible.
Challenge the Debt
Dispute incorrect assessments or amounts
If you believe HMRC’s figures are wrong, you have the right to challenge them. Common grounds include: payments not correctly credited, assessments based on estimated figures rather than actual records, penalties applied incorrectly or disproportionately, or fundamental disputes about liability.
Femi’s background as a former HMRC Inspector is particularly valuable here. He knows how assessments are calculated, where errors commonly occur, and how to present a challenge effectively. A successful challenge can reduce the debt significantly—or eliminate it entirely.
Company Voluntary Arrangement (CVA)
Restructure all your debts, not just HMRC
A CVA is a formal insolvency procedure that lets you propose paying a percentage of what you owe to all creditors over 3-5 years. If 75% of creditors (by value) vote to accept, the arrangement becomes legally binding on everyone—including those who voted against.
This can be particularly useful when HMRC is just one of several creditors pressing you. HMRC votes like any other creditor and often supports viable proposals because they recover more than they would in a liquidation.
Administration
Legal protection while you restructure or find a buyer
Administration provides an immediate, automatic moratorium that stops all creditors—including HMRC—from taking any enforcement action. This buys time to restructure the business, negotiate with creditors, or find a buyer.
An insolvency practitioner is appointed as administrator and takes control of the company. This is a more significant step than a CVA, but it provides stronger protection and is often the only option when legal action is already underway.
Which Option Is Right for You?
Not Sure Which Applies to You?
The right option depends on your specific circumstances: the size of the debt, whether other creditors are involved, the viability of your business, and how far HMRC has escalated. A free 30-minute consultation with Femi will clarify your position and identify the best path forward.
What Not to Do
When facing HMRC debt you can’t pay, the instinct is often to hide—to ignore the letters, avoid the calls, and hope it somehow resolves itself. This is the worst possible approach.
Don’t Ignore HMRC
Silence is interpreted as refusal to engage. HMRC will escalate faster, your options will narrow, and you’ll lose the opportunity to negotiate from a position of good faith. Even if you can’t pay, communication buys time and demonstrates willingness to cooperate.
Don’t Make Preferential Payments
If you can’t pay everyone, don’t pay some creditors (like suppliers you rely on) while ignoring HMRC. This could be challenged as a “preference” if the company later becomes insolvent, potentially exposing you to personal liability. Get advice before deciding who to pay.
Don’t Continue Trading If Insolvent
If your company can’t pay its debts as they fall due, your duties shift from shareholders to creditors. Continuing to trade when you know the company can’t avoid insolvent liquidation could make you personally liable for “wrongful trading.” Get legal advice urgently.
Why Femi Understands Your Situation
When you’re drowning in HMRC debt, you need someone who’s been on both sides of the table. Femi started his career as an HMRC Inspector before becoming a solicitor—he’s spent 30+ years helping businesses deal with exactly this situation.
- Former HMRC Inspector — knows how they calculate debts, where errors occur, and what makes them negotiate
- Dual-qualified — both a solicitor and tax adviser, covering all angles of your situation
- Non-judgmental approach — Femi has seen every situation; he’s here to help, not to lecture
- Honest assessment — you’ll get the truth about your options, not false promises
- Direct communication — Femi handles all contact with HMRC so you don’t have to
Frequently Asked Questions
HMRC doesn’t typically accept voluntary reduced settlements directly—they want the full amount. However, through a formal insolvency procedure like a CVA, they can be compelled to accept a percentage alongside other creditors. They often support viable CVA proposals because they recover more than they would in a liquidation. The key is presenting a credible, well-structured proposal.
HMRC interprets silence as refusal to engage, which accelerates their enforcement process. They’ll move from letters to debt collection, then to field force visits, then to statutory demands, and finally to a winding up petition. At each stage your options narrow and their attitude hardens. HMRC issues around 60% of all winding up petitions in the UK—they absolutely will follow through.
For small, straightforward debts, yes—you can call HMRC’s Payment Support Service directly. However, for larger debts, debts where you’ve previously defaulted on arrangements, or situations where enforcement action has already begun, professional representation significantly improves your chances. HMRC takes proposals more seriously when they come from experienced advisers who understand their processes.
Generally, no—limited company directors aren’t personally liable for company debts. However, there are exceptions: personal guarantees you may have signed, fraud or serious misconduct, wrongful trading (continuing to trade when you knew the company couldn’t avoid insolvent liquidation), and in some cases PAYE/NIC where HMRC can pursue directors under penalty provisions. Getting advice early helps protect your personal position.
Femi offers a free 30-minute initial consultation to understand your situation and outline your options. After that, costs depend on the complexity of your case. A straightforward Time to Pay negotiation costs less than defending a winding up petition or implementing a CVA. You’ll receive a clear, fixed-fee quote before any chargeable work begins—no hidden costs or surprises.
If rescue isn’t realistic, Femi will tell you honestly and help you close down properly. An orderly closure—through creditors’ voluntary liquidation rather than compulsory winding up—protects directors better, treats creditors more fairly, and often allows you to start again without the stigma or complications of forced closure. Sometimes the best outcome is a dignified exit.
The First Step Is Understanding Your Options
You don’t have to figure this out alone. Book a free, confidential 30-minute consultation with Femi and get clarity on your situation and your options.
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