Paying VAT Late - Worried Directors Guide

14 April 2020

Paying VAT Late - Worried Directors Guide

I keeping paying VAT late and building up arrears. What are my options?

Every limited company has tax liabilities which must be paid monthly to HMRC. Paying VAT or PAYE late could result in HMRC taking legal action against the company. What is more, penalties and surcharges can soon rise quickly, putting added pressure on the business.

What are my options?

An informal Time to Pay deal (TTP) with HMRC can be arranged, spreading out payments and giving the company some breathing space to focus on running the business.  

HMRC are not always consistent with how they approach companies looking for more time to pay VAT or PAYE. In general, HMRC will look for tax to be paid over 6 months to 1 year.  However, it is not unknown for the period to be longer.  In order to qualify for the longer period the company tends to need to have a turnover of £1m+ and they have to have had an otherwise exemplary record of filing returns etc on time.  Time to pay arrangements must be stuck to as the moment your company is late with the payments, HMRC will deem the arrangement to have failed and take action. This could be in the form of a notice of distraint or a winding up petition. In these circumstances, it is wise to have a plan B.  

Plan B is a more formal approach to pay back debt and restructure a business with a Company Voluntary Arrangement. Debt repayment can be made to creditors over three to five years (with a proportion written off completely). This can protect the company against legal action by HMRC for unpaid VAT or PAYE. Directors are still in charge of running the business. 

We can contact HMRC on your behalf to set up the TTP or it can be arranged via the Business Payment Support Service. Use our free Time to Pay Programme which includes guides and letter templates to help submit an application.

If there are aggressive creditors threatening legal action, administration or pre-pack administration are also options. These insolvency procedures can act as a ring-fence around the company while a solution is prepared or a buyer is found for the business and/or its assets. 

Categories: HMRC Time to Pay Arrangement

A Worried Director

The Ultimate Guide For Worried Directors

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Please note that the guide was mostly written pre Covid-19 and there have been some changes to insolvency legislation that limits creditors actions and relaxes rules regarding wrongful trading.  A new 20 day moratorium for distressed businesses has also been introduced. 

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