I can't pay VAT, I cannot pay PAYE! The company is behind with PAYE and VAT payments! What can we do?"

If your business has tax problems, like arrears of PAYE and VAT then the company is probably insolvent! You must act to do something about these problems and this guide will show you how. See our guide to "Is our company Insolvent".

Not paid the deductions of PAYE and NIC across to HM Revenue & Customs? Well, as you will now know that is something that they do not like! Basically, its tax payer's money and the collectors are there to collect it, no grey areas, just black and white. Pay up on time or they will take action.  The introduction of Real Time Information Systems (RTI) from HMRC from 6th April 2013 as a way of paying your PAYE it will be impossible to understate your PAYE liability in the hope that you will be able to catch up further down the line.  See this page on RTI for details

What are the available options for VAT and Paye Arrears?

Once you have read more about the problem on our guide pages like Is our Company Insolvent?, Directors Do's and Don'ts and Warning Signs? then the options you have available are:

1. Ask for time to pay the debt. In the current recession, HMRC has a Business Payment Support Service (BBPS) which was introduced by the Government in 2008. Under this service all SME's with cashflow issues should be able to get a Time to Pay arrangement with HMRC: if you need help why not use our expert programme, or call the BPSS?
2. Consider a company voluntary arrangement (click for guides to the best solution).
3. Think about an administration solution - This may protect the company from aggressive legal action of HMRC.
4. Finally, can you introduce more money into the company to pay the tax debts?

You can also visit this Trading out, guide to how to deal informally with the problem. This can avoid formal approaches like voluntary liquidation, CVA, compulsory liquidation and administration.


HMRC are getting more aggressive as over 260,000 companies are on some form of payment plan and many are failing to keep up with that Time to Pay plan. Many companies are beginning to see aggressive threats from HMRC. In 2011 HMRC stopped publishing statistics (See this page for some comment on this) This will include those seeking an additional payment plan following the first. More are seeing threats of winding up petitions.

Non payment of this tax is a failure to comply with the tax legislation and also signifies publicly (loud and clear to HMRC) that the company is insolvent. So, you need to act properly and responsibly and deal with this serious threat to your company.

So if you need urgent help - call us now on free call 0800 970 0539 or email our advisors on This e-mail address is being protected from spambots. You need JavaScript enabled to view it

It may be that we can help with a time to pay deal

Remember that if the company is insolvent you could be personally liable for the debts, if you continue to trade, whist doing nothing about the problems that it faces. Wrongful trading can be a real problem where ongoing tax arrears are building up and the company then enters insolvent liquidation.   Failure to pay NIC could result in a personal liability notice from HMRC.

So, act carefully, keep notes of any decisions and always write names of people you speak to at HMRC down. Take advice from experts, and above all act promptly as delay may just lead to more problems for you as directors. If you want to know more about wrongful trading click here.

Don't wait until legal actions have been taken against the company to ask for a "Time to Pay" deal with HMRC. It is better to ask for help BEFORE arrears build up.

Try to plan the cashflow of the business well in advance - you have a legal obligation to do this! If the directors do not think the company has sufficient cash to trade they should consider the obligations and options and plan a way forward.

Don't be too ambitious in planning repayment; you will have bad months as well as good, so be careful with the cashflow forecasts. Want a free cashflow model? Email This e-mail address is being protected from spambots. You need JavaScript enabled to view it for advice

Worried about legal actions? Such as distraint or winding up petitions - click the links for more information.

Ask for 18 months to pay back PAYE, knowing that you will may get 9-12 months at most.

Ask for 12 months for VAT and they may accept or offer 6 months.

If your cashflow forecast says the company can be viable, but the business cannot afford that fast a repayment programme, then you must consider a company voluntary arrangement - (CVA).

Yes we use a 3 month "rolling cashflow" forecast model. download it with all the hard programming work already done for you. All you have to do is enter the payments to creditors on the days you expect to pay, and then insert when your customers or factoring company will pay you. The programme then tells you what your cash position is every day!

If your bank overdraft looks like it is being exceeded, then you can move payments along a few days. This gives you an at-a-glance cash position. 

If  the company is viable but insolvent then a CVA may be the option.  A CVA is the most powerful way of dealing with a serious cashflow problem and tax arrears (which proves insolvency). HMRC supports well proposed CVA's, you do not have to pay back all of the debt and thirdly you remain in control.

Do Nothing!??? This is not an option as it will lead to: Bailiffs, Sheriffs, walking possession, distraint and more worry - see here for How to deal with Legal Actions