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Late Payment of VAT and Debt Management

5th May, 2023
Robert Moore

Written ByRobert Moore

Marketing Manager


Rob has over a decade of experience in web and general marketing. He has extensive knowledge of the Insolvency sector and has helped many worried directors with their questions.

Rob is now working with the Board at KSA Group Ltd to develop strategic marketing programmes to support the business plan and drive more company rescues.

Robert Moore
overdue bills
  • What are the consequences if I miss a VAT deadline?
  • How can I prevent late VAT payments?
  • What are the available options for late VAT payments?
  • Will I be personally liable for the VAT?

Paying VAT late will result in a penalty, known as a “default”. HMRC work hard to ensure every company pays its VAT and tax obligations on time because the money belongs to the taxpayer.

Continually failing to pay VAT on time can lead to legal action, for example, a winding up petition issued by HMRC. The petition is advertised publicly and in the worst-case scenario could force the company into liquidation.

What are the consequences if I miss a VAT deadline?

If your company turns over more than £150k and misses its first VAT payment deadline, you will be sent a ‘Surcharge Liability Notice’. If your company fails to pay on time for the next 12 months, HMRC will impose penalties depending on the VAT amount.

If your company has a turnover of less than £150k, HMRC will send you a reminder letter about paying VAT on time. If you miss another payment deadline within the next 12 months, you will then be sent the Surcharge Liability Notice and be put into the penalty process.

If the company defaults, HMRC will notify you of any surcharges. A surcharge is a percentage of the tax that has been paid late. View the surcharges and penalties here.

How can I prevent late VAT payments?

There are several ways to prevent late payments from happening, or becoming a severe problem. If late payments are a recurring issue, cash flow and general financial management must be addressed. Conducting a business review or audit will help pinpoint cash flow problems.

If your business is struggling, consider asking for a time to pay deal (TTP) with HMRC. This plan allows the company to repay the debt over a few months, or up to a year, in affordable instalments.  This could be referred to as a VAT debt management plan.

Call us now on 0800 9700 539 for help with VAT payment problems.

What are the available options for late VAT payments?

  1. Enter a VAT debt management plan or time to pay arrangement with HMRC
  2. Get a VAT loan but be careful this is not just putting off important decisions
  3. Propose a Company Voluntary Arrangement

As experts in turnaround and insolvency with over 20 years of giving advice we are able to spot the issues, set out a plan and guide you, if you need it. We are also licensed by the government to act as insolvency practitioners so we MUST give correct, proper and relevant advice.

  • Can you re-finance the company or business?
  • Is there a way to raise money from a bank loan or factoring company for example?
  • Is it possible to replace that factor?

Can you put personal funds into the company? Warning : make sure that the business is VIABLE in future before doing that.

Ask for time to pay the debt or a TTP as we call it.  HMRC provides a “Business Payment Support Service” (BBPS). Using this service, all businesses with cash flow problems can request a Time to Pay arrangement with HMRC: if you need help why not use our expert programme, You can call the HMRC’s Payment Support Service  on Tel 0845 302 1435.

HMRC will want to know why you are not on time with paying VAT. The collector will ask questions like:

  • What are your plans?
  • Why has the debt come about?
  • Has a bad debt occurred?
  • Have you spoken to the bank and asked for help there?
  • Can you put money in?

Depending on why you can’t pay, how long you need to pay the arrears of VAT owed and your payment history – HMRC may allow you a few months to pay the debt off. Warning; usually all future tax debts (including corporation tax, PAYE and NIC) must be paid on time or the TTP will fail.

If a TTP is not affordable then maybe a Company Voluntary Arrangement (CVA) is an option

We can arrange a CVA or company voluntary arrangement. This will take the pressure off straight away! A CVA is simply the best way of restructuring a company’s debts available and the good news is you stay in control of the company. See our VIDEO on CVAs here. The CVA option allows tax debts to be partially written off. It also allows you to cut costs, make redundancies and plan the turnaround of the company. Will that solve your problems?

If a threat of a winding up petition is made by HMRC then an Administration or pre pack administration solution can be a great solution. Pre Pack administration is a powerful way to protect the business assets and sell them to a new company formed by you or a trade buyer for example. This will protect the company from aggressive legal action of HMRC like winding up.

If the company is simply never going to be viable, then you should carefully consider creditors voluntary liquidation, this effectively closes the company down and may help protect the directors. Read more here on liquidation.

If your business is constantly building up arrears of VAT this is a failure to comply with the law and also makes HMRC tax collectors think that the company is insolvent. So, you need to act properly and responsibly and deal with this serious threat to your company.

Will I be personally liable for the VAT?

Remember that if the company is insolvent, and if it goes into liquidation in future you could be personally liable for the debts, if you continue to trade, whilst doing nothing about the problems that it faces. If you KNOW the company is insolvent and you make the creditors’ position worse, then in a future liquidation you can face personal liability for the debts you took on.

Our advice is always to act quickly and carefully, get expert advice from us, keep notes of any discussions and decisions and always write down the names of people you speak to at HMRC. Finally, don’t wait too long to get professional turnaround help. Call the HMRC debt experts on 0207 887 2667 or 0800 9700539 or email our advisors on

Worried Director What Will Happen To Me After Liquidation?

in Company Liquidation What is …?

"A man in the pub said I cannot be a director of any other company if I liquidate my company. Is this true?"Actually, this statement is entirely false! Misconceptions like this frequently arise from individuals with limited understanding of the subject matter. Such misinformation can cause undue anxiety for directors considering liquidation, fearing it might personally affect them. Guess what? Listening to bar room experts, inexperienced accountants, or no insolvency specialist lawyers can stop decisions being made, this failure to make a decision is really what could land you in trouble. So how will liquidation affect me and how long does it take? Having a limited liability company means that the directors have little risk (or limited liability) if the company fails, as long as they have acted properly and acted in time. What is more, if as a director, you have been compliant and on the payroll for many years, you can actually claim redundancy from the government like any other employee. But, and it is a big but, if you fail to act in time, fail to act reasonably, fail to keep books and records, continue taking credit KNOWING that the company cannot possibly repay it, then you ARE at risk of personal financial loss or worse such as losing your house. So, act now and get help for your company and more importantly start reducing your own risks.Voluntary liquidation is the quickest most efficient way to deal with an insolvent company that has no future. As a director of an insolvent company, you are at risk if you do not act. This risk RISES the longer you don't act to put the company into liquidation.If you fail to act and the company is wound up by the creditors (compulsory liquidation) then the Official Receiver (OR) will be appointed to liquidate the business and he or she will investigate the activity of the directors and the business over the last 2-3 years. This is known as a conduct report on each director.  If the OR can prove there was wrongful trading where, for instance, you have taken credit from a supplier or took deposits from customers when you knew that it was highly unlikely that you could pay them back, then you could be made personally liable.This is known as the "lifting of the veil of incorporation" that protects directors under limited liability. If this happens then you could made liable for PAYE, VAT and creditors monies from the time that you should have known the company had no reasonable prospect of surviving the problems it faced.Additionally, the directors may face disqualification proceedings under the Company Directors Disqualification Act 1986 for up to 15 years, they can be fined and may face the loss of personal assets like your home, or even personal bankruptcy.Look, if you as directors have acted naively you may not know that you have broken these laws, but now you do know, it is vital to ensure that you protect yourself as a director by acting quickly to cease trading and put the company into voluntary liquidation; or consider a company voluntary arrangement if the company is VIABLE if the problems are solved. What is Creditors Voluntary Liquidation and what does it mean for me? In short, liquidation usually means, the company's trading stops and it's assets are turned into cash or "liquidated".All other possible liabilities, like employment liabilities, landlord's rent or payments to lease companies are stopped. It really is the end of the company, but the "business" may survive if a phoenix is organised. Liquidation is a powerful way to END creditor pressure and let you get on with your life. What if I have signed personal guarantees? If you have signed personal guarantees or indemnities to lenders, then the liquidation could lead to them being called in if the bank cannot get its money back from the company. There is little that can be done about that, but you should not delay decisions on liquidation to try and prevent a PG being called in: just think what ALL of the company's debts landing on your shoulders would do. Also it should be noted that HMRC now rank ahead of floating charge holders in any liquidation since December 2020.  Consequently, this may well mean that lenders that you have personally guaranteed will get less recovery hence exposing you more.All banks will agree a deal to repay the PG over time - provided you work with the bank to reduce their exposure.One great piece of FREE advice - always make sure that ALL tax returns, VAT returns and annual returns have been completed and sent in and that other "compliance" issues are dealt with wherever possible. These are important processes and will help protect you as individual directors. It shows that you have been acting properly.  I have heard about directors being able to claim redundancy in liquidation If you have been employed by the company and made payments via PAYE then you will be able to claim redundancy from the government and this is in fact a very simple process (20 minutes to fill out a form and we can help with that) so there is no need really to employ a third party to make a claim.  This process has been open to fraud so the HMRC are cracking down on operators that claim to be able to get money back when there is not enough "paperwork".  It isn't worth the risk.  If it sounds too good to be true then it probably is!You need to learn more about the options. This is clearly a general guide so, if you have any worries at all, please, just call us and we will talk you through the situation free and with expert guidance for your situation. Call one of our advisors or if you prefer, call our IPs (insolvency practitioners) now:Just one CALL will help relieve the stress and get you out of the mess.Why not call 08009700539 or 020 7887 2667 now?We could help you start the liquidation process today.(8.15am till 5.00pm; Out of hours call on 07833 240747, Wayne Harrison (IP)  or Eric Walls (IP) on 07787 278527)Finally, please remember this: NO BUSINESS is worth losing your health, relationships, marriages or your children over. Act properly, take advice, get the problem sorted and then get on with your life. In a little while the stress will go and you can focus on other things that are more important.Want more information on liquidation? Get our new free 2023 Experts Complete Guide to Creditors Voluntary Liquidation that covers Bounce Back LoansWe are experts in liquidation, voluntary liquidation, administration, pre-pack administration, business rescue, corporate rescue and company rescue, we can help solve your problems but only if you talk to us. Call 0800 9700539 for help.or email us your worries at 

Worried Director What Will Happen To Me After Liquidation?

Notice of Intention To Appoint Administrators

A notice of intention to appoint administrators is when the company files a document to the court to outline that it intends to go into administration if a solution cannot be found to its immediate financial problems. It can be used as part of the pre-pack administration process as well as used to restructure a failing business to avoid its liquidation.

Notice of Intention To Appoint Administrators
Man with umbrella

What Is A Winding Up Petition By HMRC or Other Creditor

A winding up petition is a legal notice put forward to the court by a creditor. The creditor petitions to the court if they are owed more than £750 and it has not been paid for more than 21 days. The application, in effect, asks the court to liquidate the company as they believe the company is insolvent.

What Is A Winding Up Petition By HMRC or Other Creditor

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