PAYE Tax Arrears - HMRC Tax Advice

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PAYE Tax Arrears

PAYE tax needs to be paid monthly or for the smaller business quarterly. The HMRC may conclude from failure to make payments that the company is insolvent. This can be a significant sum if the business employs many staff and the arrears cover two or more payments. Failure to discuss this with the HMRC will result in them adopting a standard process for recovery of the debt and will be more formal than most suppliers.

So how should one deal with PAYE Tax Arrears:

Discuss with the HMRC - and seek time to repay. If you had a problem paying this month what will change over the coming months. In most cases a serious review of the situation is required and plans need to be made and implemented.

It may require a more significant change - seek a Company Voluntary Arrangement; talk to an insolvency practitioner and move into Administration or into Receivership. Every case will be different - to get guidance on the options call one of our advisers and discuss the specific situation.

To summarise on the options:

  • introduce a business improvement plan to reduce costs, increase sales, improve debt collection and improve margins on sales. If this is practical and possible then a straight forward repayment plan is possible. Sometimes cost reduction increases the immediate costs through redundancy costs so it is not always straightforward.
  • find a cash injection from a bank; a fixed asset funder; introduce invoice discounting. There are many options and many different types of funders - speaking to an adviser will help streamline the process and avoid many wasted hours talking to funders who will not listen to the opportunity.
  • the structural changes - like creditors voluntary arrangement, administration, prepack administration do require some significant advice and evaluation - but it does need to be done in a timely fashion as PAYE Tax Arrears will not be ignored - the situation has to be addressed in a formal and open way.

To some extent this arrears is a call to action and give the focus to a proper review. Ignoring the issue is not appropriate - sometimes this month or quarter's problem can be avoided but often this is just the prelude to further defaults in PAYE Tax - so it is sensible to discuss with an adviser as soon as practical. Without doubt time is of the essence and the earlier discussions the earlier problems are addressed and solutions implemented.


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