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I Can’t Pay The PAYE That My Company Owes

Written by Robert Moore Marketing Manager 31 January 2022

I Can’t Pay The PAYE That My Company Owes

What is PAYE?

Pay As You Earn (PAYE) refers to employee income tax and National Insurance contributions which companies, as employers, must pay to HMRC.  Employers are to report PAYE information in real time, also known as, ‘real time information’.  Using Real Time Information (RTI) software, the company informs HMRC of all payments that are due and what has been deducted etc.  This allows for HMRC to spot very quickly if a company has not paid over what is due.  In the past companies could accrue large PAYE debts without HMRC knowing.  The RTI system was put in place to stop this abuse.

It is due to be paid as follows:

  • The 22nd of the next tax month for those who pay it monthly
  • The 22nd after the end of the quarter for those who pay it quarterly
  • The 19th of the month for those who pay by cheque/post

There may come a time when the company struggles to pay PAYE when it’s due.  This means that you are in debt to HRMC.  Consequently, penalties will be added, and interest will star to accrue.  It is unlikely that HMRC will allow large amounts to accrue.  They will most likely threaten a winding up petition or send round an enforcement officer to take “control of goods”.  If this happens you must act.  If HMRC take this sort of action, then it demonstrates that the company is insolvent.  The duties of a director change in this situation and they must act in the best interest of creditors not the members or directors.  In such a situation, seek advice as there are options available to help you through.

What Are The Options To Deal With PAYE Arrears

Time to Pay arrangement with HMRC

HMRC are pretty helpful in that with supporting evidence (that eventually debts will be paid and the repayment plan can be followed) and a convincing enough argument, an agreement can be made to delay some payments for a certain amount of time. Often this is for 6-12 months.

When discussing with HMRC about allowing flexibility and approving your application for a time to pay (TTP) arrangement, you must be realistic and honest, saying what can be afforded. There is no point offering more than you can afford.

Note – at Company Rescue we deal with HMRC on a daily basis, so we are experts in how to help you out here.

A Company Voluntary Arrangement (CVA)

A CVA is essentially a deal between the insolvent company and its creditors; This deal places a legal ring fence, called a moratorium, around the company and stops creditors attacking it. This allows a viable but struggling company to repay some, or all, of its historic debts out of future profits, over a period to be agreed.  This period is usually 3-5 years.  In addition, it allows the company to cut costs easily such as vacating premises, making redundancies at no cost, and exiting onerous contracts.

Administration

Administration is a very powerful process for gaining control when a company has serious cashflow problems, is insolvent and facing serious threats from creditors. The Court may appoint a licensed insolvency practitioner as administrator. This places a moratorium around the company and stops all legal actions.

The administration must have a purpose and the Government encourages the use of company rescue mechanisms after administration.

The principal aim is to rescue the company and there should be a better result than going into liquidation.  In many instances the business is sold either to a third party or back to the owners in what is termed a pre pack administration.  However, pre packs are getting increasingly hard to do.

Some further things to consider:

You, as a company director, can only be held liable for having PAYE debts to HMRC if the government suspects you have deliberately or purposefully failed to pay. A Personal Liability Notice will be filed against you.

You will be warned before any drastic actions take place. You must take the warnings seriously and act accordingly. Automated letters will be sent to remind you to pay, outlining how to do so. If you ignore this, the situation will escalate and penalties will be charged for late payment. As time continues if you fail to respond and act, further letters demanding payment will be sent. Basically, do not run away from the situation and bury your head in the sand!

How can we help?

At Company Rescue we have years of experience in helping companies and worried directors who face difficulty when it comes to paying PAYE. One of our advisors will take time and effort to understand the causes of the financial issues and payment difficulties, and suggest what the most suitable way forward for you is. Get in touch today.

Category: HMRC Time to Pay Arrangement

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