Can You Have HMRC Debts Written Off?

Many business owners ask if they can have their HMRC debts written off, and while technically the answer is a little too nuanced for a straight yes or no, there’s certainly scope to reduce or remove the debt altogether.

HMRC will always look to claim what is due to them, but occasionally, this isn’t possible. As HMRC debt often accompanies corporate insolvency, it’s understandably difficult to recoup all of their losses. In these instances, HMRC can occasionally admit defeat after realising that there’s nowhere that the owed money can come from.

 

 

I’ve read elsewhere that there’s no way to have HMRC debts written off

There’s some semantic ambiguity over whether HMRC actually writes off the debt in a CVA, or merely leaves it with a company in the acceptance that it will never be paid. Either way, for all intents and purposes, this practice is what most of us would refer to as writing off a debt.

 

How can I have my HMRC debts written off?

One way to have HMRC debts written off is to enter into a Company Voluntary Arrangement (CVA). These arrangements allow insolvent businesses to arrange payment plans with their creditors. These plans often ask creditors to accept less than they’re owed rather than potentially nothing at all. This can even help businesses to carry on trading, which can be a boon for suppliers and other businesses that count the affected party as a client.

Usually, any HMRC debts written off are only partially so. CVAs can only proceed if the creditors behind 75% of the company’s debt value agree to it. If a creditor isn’t set to receive any of their money, they’re unlikely to agree.

 

Can HMRC debts be written off in any other way?

Liquidating a company will also see HMRC debts effectively written off. This process sees an insolvency practitioner sell off a company’s assets and divide the money made between the creditors. The amount raised often doesn’t cover the debts it needs to pay, so businesses and organisations have to accept a lower payment or nothing at all.

A Creditors’ Voluntary Liquidation (CVL) can effectively write off HMRC debt too. Similarly to a CVA, a CVL is entered into voluntarily, but requires the company to be liquidated. This can stop pressure from creditors, halt further legal action, and allow employees to claim unpaid wages or redundancy pay from the government.

 

What other options are there?

If you’re struggling to pay HMRC debt, you can look into the possibility of securing a Time to Pay arrangement.

Time to Pay arrangements allow businesses to pay back their HMRC debts over an agreed period. This can be a huge relief to many companies as HMRC bills can often be a considerable size. By splitting the payment into instalments of a manageable amount, a Time to Pay arrangement can sometimes be the difference between a company surviving or having to enter the insolvency process.

They can be tricky to secure and negotiate on your own, so it’s recommended that you hire the services of a specialist HMRC negotiation team such as our own. That way, you’ll almost certainly achieve a much more forgiving payment plan that gives your business the best chance to get back on its feet.

 

What measures do HMRC usually take to claim what they’re owed?

It’s always best to take action with HMRC debt as soon as possible. HMRC can be very proactive in recovering debt and will go to a number of lengths to do so.

Letters, texts, and visits to your workplace or home are common occurrences, but they have several other options should these not yield the result that they’d like.

HMRC can employ debt collection agencies to work on their behalf and even close down your company if you ignore their messages

 

 

Can I be held personally liable for my company’s HMRC debts?

Trading as a limited company lends a degree of protection to its owner, as the business is a discrete entity in the eyes of the law.

However, business owners can be pursued by HMRC if they are suspected of fraud or wrongful trading. One of the more common issues that can cause HMRC to chase down a business owner is when they have continued trading despite their company being insolvent.

While it can seem natural to some to want to generate as much money before a company closes as possible, doing so can compound the situation further. When an insolvent company continues trading, it racks up more debt with suppliers, utility companies, and of course, HMRC. This is looked upon unfavourably as a result, and can lead to disqualification as a director, or even criminal charges.

 

How long can HMRC chase for unpaid tax?

There’s no limit on how long HMRC will chase outstanding tax payments for. They can chase decades-old debts. As well as this, they’re pretty proactive too, so rather than hoping that they forget about any tax debt you’ve accrued, it’s best to either get in touch with a negotiation service such as ours straight away, or go direct to HMRC to explain your situation yourself.

National Insurance is slightly different, with a six-year period in which they’ll try to chase a debt.

 

So, can my business have its HMRC debts written off?

Outside of a CVA or liquidation, no. Even having HMRC debts reduced in a CVA is relatively rare, so it’s not something that should be counted upon by any means. For many, HMRC debt is best handled with a Time to Pay arrangement. A specialist negotiation team can secure a payment plan with instalments affordable enough to clear the debt.

 

A large tax bill needn’t be a company’s death sentence

With Time to Pay options available for most scenarios, it’s frustrating to see so many businesses fold or struggle because of large tax bills.

If you think your business might benefit from spreading its tax payments out over a longer period of time, it’s worth taking five minutes to talk to an experienced business advisor about the possibility of applying for a Time to Pay arrangement.

Those concerned that their company would still struggle, meanwhile, may want to look at the different closure options available to them. Our business closure specialists can talk you through the best route to take depending on your situation and worries.

Call us on 0800 975 0380, or email [email protected] for a free consultation to see how we can help.