Missing an HMRC payment is common when cash is tight. What matters is what happens next. Directors who wait for the next letter, or who make an informal promise the cash flow cannot support, usually find that the remaining options are narrower.
Establish the real arrears figure
Start with a complete picture: VAT, PAYE, corporation tax, interest and any penalties. Include amounts that will become due on the next filing, not only the balance on the last statement. A plan that ignores the next VAT quarter is not a plan.
Then set that figure against a short-term cash flow. The question is not whether the company would like to pay. It is whether ongoing tax, payroll and critical suppliers can be met if a repayment schedule is added on top.
Time to Pay
HMRC can agree Time to Pay arrangements where the request is credible. That usually means a realistic monthly amount, evidence that the business can stay compliant going forward, and an explanation of why the arrears arose.
Time to Pay is not automatic. A history of broken arrangements, missing filings or an unconvincing forecast can lead to a refusal. If that happens, directors should look at HMRC debt support in the round, including whether a wider restructuring is required.
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When an informal arrangement is no longer enough
- HMRC has already started enforcement or issued a statutory demand.
- The arrears cannot be cleared from forecast cash within a period HMRC is likely to accept.
- Other creditors are also pressing and a single-tax solution will not hold.
- The underlying business is not viable in its current form.
In those cases, a Company Voluntary Arrangement or another formal process may need to be compared. Construction companies should also read the construction HMRC debt page, because CIS and reverse charge issues often sit behind the headline arrears.
Do not ignore the rest of the board's duties
Preferential treatment of one creditor, including a well-intentioned attempt to keep HMRC quiet, can create problems later. The safer approach is to look at the whole creditor position and at director duties while there is still time to choose a route.
