When a company is under pressure from HMRC, it is important to take early advice and consider all available options carefully. The right solution will depend on the company's financial position, its future viability, the level of creditor pressure and whether the directors are willing and able to commit to a longer-term repayment plan.

In many cases, there may be more than one option available.

HMRC Time to Pay Arrangement

One option may be for Parker Walsh to act on behalf of the company in proposing a Time to Pay arrangement with HMRC.

A Time to Pay arrangement is an informal repayment agreement that allows a company to repay tax arrears over an agreed period. This can include liabilities such as VAT, PAYE, Corporation Tax or other HMRC debts.

HMRC ultimately need to take a commercial approach if they genuinely wish to recover the debt. In many cases, demanding immediate payment in full may not be realistic and could result in the company entering a formal insolvency process, reducing the amount HMRC may recover.

Parker Walsh can assist by preparing and presenting a sensible repayment proposal that the company has a realistic prospect of maintaining. This is important because agreeing to an unworkable arrangement can be damaging. If a company agrees to pay more than it can afford, the arrangement may fail after only a short period, leaving the company in a worse position and increasing the likelihood of enforcement action.

A properly prepared Time to Pay proposal should be based on the company's actual cash flow, trading position and ability to maintain ongoing tax obligations while repaying arrears.

Company Voluntary Arrangement

Another option may be to propose a Company Voluntary Arrangement, commonly known as a CVA.

A CVA is a formal repayment plan between a company and its creditors. Unlike an informal Time to Pay arrangement with HMRC, a CVA includes all creditors of the company. This means that anyone owed money by the company would be incorporated into the arrangement.

A CVA can be a useful option where the company has multiple creditors, ongoing trading prospects and a realistic ability to make contributions over time.

One advantage of a CVA is that, once proposed, the matter is transferred away from HMRC's Debt Management department. This can be beneficial because Debt Management can sometimes be inconsistent and commercially inflexible when considering informal repayment proposals.

Instead, HMRC's position in respect of a CVA is usually reviewed by its specialist CVA team. Those officers are experienced in assessing formal restructuring proposals and will consider whether the proposal is fit, fair, feasible and compliant with HMRC policy.

This can create a more structured and commercially focused process, rather than one driven by short-term pressure or inconsistent responses.

The Importance of a Realistic Commitment

Whether the company is considering an informal Time to Pay arrangement or a formal CVA, directors must be sure that they are willing and able to enter into a lengthy repayment commitment.

Both options require discipline and forward planning. The company must be able to maintain the agreed payments while also keeping up to date with ongoing tax liabilities, supplier payments, wages and other trading costs.

If the company cannot realistically maintain the proposed payments, the arrangement may fail. This could lead to further creditor pressure, HMRC enforcement, winding-up action or the need to consider other insolvency options.

For this reason, any proposal should be carefully prepared and based on realistic financial information rather than optimism alone.

What If HMRC Will Not Agree?

If HMRC are unwilling to accept either an informal Time to Pay arrangement or a CVA, other options may need to be considered.

One possible route may be a pre-pack administration or other business and asset sale solution. However, this is not always ideal and must be approached carefully.

In a pre-pack scenario, any new company or purchasing entity would need sufficient capital or investment to acquire the business and assets at fair market value. The transaction would need to be properly valued, documented and completed in accordance with insolvency legislation and professional requirements.

Where the company's assets have limited value, this may affect the viability and structure of any potential transaction. However, the position would still need to be assessed properly before any decision is made.

Taking Advice Early

When HMRC debt becomes unmanageable, directors should not ignore the situation or agree to repayment terms that the company cannot afford.

The key is to take early advice, assess the company's financial position and put forward a realistic proposal where possible. In some cases, HMRC may be prepared to support a sensible repayment plan if it offers a better return than immediate enforcement or insolvency.

At Parker Walsh, we can review the company's position, deal with HMRC on behalf of the directors and advise on the most appropriate solution, whether that is a Time to Pay arrangement, a CVA, or another restructuring option.

If your company is under pressure from HMRC, contact Parker Walsh for free, confidential advice.

FAQs

What is an HMRC Time to Pay arrangement?

It is an informal agreement that lets a company repay tax arrears such as VAT, PAYE or Corporation Tax over an agreed period.

How is a CVA different from a Time to Pay arrangement?

A CVA is a formal arrangement covering all of a company's creditors, whilst a Time to Pay arrangement is informal and deals only with HMRC.

What happens if a company cannot maintain its repayment plan?

The arrangement may fail, which can lead to further creditor pressure, HMRC enforcement action, winding-up proceedings or the need to consider formal insolvency options.

What is a pre-pack administration?

It is a business and asset sale arrangement where a new or purchasing entity acquires the company's business and assets at fair market value, properly valued and documented in line with insolvency legislation.

Why is it important to seek advice early when HMRC debt builds up?

Early advice allows a realistic proposal to be prepared and increases the chance that HMRC will support a sensible repayment plan rather than pursuing enforcement or insolvency.

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