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What happens if I can’t pay my company’s VAT bill?

If your taxable business turnover exceeds £90,000 you must register with HMRC, although you can also register voluntarily if you’re beneath this threshold. Being unable to pay your VAT liability at any point is a serious issue, which requires you to get in touch with HMRC as soon as possible.

The tax body does recognise that companies experience financial issues from time to time, but if they’re only temporary and the company isn’t insolvent, they may be able to offer you a payment plan to help with the arrears.

HMRC help to pay your company’s VAT

HMRC may be willing to offer you a Time to Pay (TTP) arrangement so you can repay your arrears over several months without penalty. Your company’s previous history of paying its tax bills will be taken into account, as well as the speed with which you contact them.

You’ll need to explain why the company cannot pay under the given timescale and what you’ll do to make sure it can meet all the Time to Pay instalments without issue – cutting costs, for example, or selling assets to raise funds.

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How does the Time to Pay scheme work for VAT arrears?

Instalment plans range from 3-6 months up to around 18 months, but it can be difficult to calculate a repayment offer that HMRC are happy with when your company is struggling. You don’t want to offer too little as it might not be accepted, but affordability is also crucial.

If you renege on the repayments HMRC can forcibly wind up your business, which is why it’s advisable to seek professional support. Company Closure can negotiate with HMRC on your behalf and present a solid business plan that shows you can afford the payments.

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Other options when you can’t afford your company’s VAT bill

Additional funding

If a Time to Pay arrangement isn’t an option, selling one or more non-essential assets could provide a lump sum of cash to pay the bill and other debts. Alternative funding such as invoice finance may also provide a good solution.

Formal instalment plan for multiple debts

A Company Voluntary Arrangement (CVA) may be appropriate if your company is struggling under unmanageable debt. In this case, your company’s debts are restructured within a formal payment plan, which allows you to trade your way out of financial difficulty.

Official insolvency solution

The eight-week moratorium on creditor legal action that’s triggered when you enter company administration may provide the ‘breathing space’ needed to restructure if you believe HMRC could forcibly wind up the business.

Voluntary liquidation

Creditors’ Voluntary Liquidation (CVL) offers you a statutory route away from financial difficulty if the company has no future. It also allows you to meet the changed legal requirements when running an insolvent company.

For more information on your options if you can’t pay your company’s VAT, please get in touch with Company Closure to arrange a free, same-day consultation. We operate a nationwide network of offices and can quickly guide you towards your best options.

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We are licensed by recognised professional bodies and have helped thousands of directors over many years. Contact us today for your free company closure consultation.

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