I Can’t Afford to Pay My Suppliers or HMRC, What Are My Options?

Only a few businesses can boast that they have not experienced any cash flow problems at some point in their existence.

Most companies have experienced issues that made the business get into financial difficulty and unable to pay HMRC and/or their suppliers; for example, late payments from debtors, client cancellations or an unexpected fall in demand.

Some of these may be severe enough to cause cash flow problems, if this should happen there are a few options which we’ve outlined below:

What options should I be thinking about?

When faced with problems like being unable to settle payments with your suppliers, it is important for you to act quickly, if you need some free advice you can contact us so we can tell if your business is viable or come up with tough decisions that’s will ensure your debts are settled and prevent possible actions from your debtors.

Below we’ve outlined some of the common solutions that can be used but be aware that they may not be suitable for your circumstances. Regardless of the path you decide to follow, we can provide all the assistance you need.

1. Making an affordable monthly payment

A Company Voluntary Arrangement (CVA) might be the best option for your business if your business can be profitable in the future.

A CVA consolidates the debt of your business into a single affordable payment per month. The duration normally lasts for 60 months, and this option is better for creditors than liquidation.

It’s worth noting that there are usually quite a few restrictions on a CVA and it is not always suitable for all companies.

2. Financing through the problems

Commercial financing is one of the first options to consider. Your type of business, as well as the structure of your business, will determine the kind of financing you will use.

You can receive advice and guidance from one of our friendly advisors on what your business stand to gain from any of the listed options, and receive the best quote from top providers; you won’t pay us anything for this service – it’s completely free.

3. Closing the business using a creditors voluntary liquidation or dissolution

If the possibility for your company to recover is on the low side (and you no longer want the business) a Creditors Voluntary Liquidation (CVL) may be the best choice.

Here, assets belonging to the company are liquidated to settle creditors, and all business functions and processes are terminated. A CVL has to be carried out by a licensed Insolvency Practitioner.

There is another closure solution called an Administrative Dissolution which may be better suited if you company doesn’t have any funds or assets to pay for a liquidation as it is considerably cheaper.

4. Closing and starting over

If you want to buy your business as well as your assets back and resume trading, a Pre-Pack Administration (also known as Business Restructuring or a Company Restart ) could be the most suitable procedure.

This process is adopted when the model of business is workable but the company, however, cannot continue trading because it’s in too much debt.

The sale is usually approved in advance of the appointment of administrators, alongside advice from agents on the best way to market the assets, and if applicable, the sales occur instantly after the appointment.

This permits a smooth transfer of business, usually but not all the time, to the same owners and management team.

This could give rise to a Phoenix company, preserving employment, offering better returns to creditors and offering directors a new beginning.

You can buy your business back effectively with our assistance and guidance and make profits or become successful for the second time.

Do I need to stop trading?

You become insolvent if the debts you owe are greater than your assets and you lack the resources to pay your suppliers; we highly recommend that you contact us as soon as you can if you suspect that your company is insolvent as you could be found liable for its debt.

For your own good, we recommend that you stop trading to avoid the risk of partaking in civil offend due to wrongful trading, or on a more serious note, getting involved in fraudulent trading. Both examples are offences under the Companies Act 2006 and Insolvency Act 1986.

Wrongful trading

It’s the duty of directors to be conscious of the financial situation of their company all the time.

Thus, as a director, you have to let the shareholders know if and when the company is insolvent and contact an insolvency specialist for assistance. Notify your creditors and make arrangements for alternative payments.

You will only worsen your creditor’s position more if you continue to trade, and this is considered wrongful trading.

You could face disqualification for nearly 15 years if you are found guilty of wrongful trading, plus there may be other financial fines and penalties you are liable for.

Fraudulent trading

It is called fraudulent trading when the director deliberately acted to stop paying company liabilities. An allegation of this nature could result in a prison sentence, fines and director disqualification.

Selling assets belonging to the company before liquidation or taking credit when you know the company cannot repay are considered as fraudulent actions, and the consequences to this are severe.

In conclusion

If you don’t have the resources to pay suppliers, you still have access to solutions that will likely solve the problems your business is experiencing.

Putting more funds into the company is worth it if the company can genuinely continue trading after resolving the underlying problems.

Plans for formal payments are available; however, these plans should only be adopted if the possibility of the company succeeding is viable. Liquidating the company would be a suitable alternative if you don’t want to continue trading.

If you choose to continue trading, knowing fully well that paying your suppliers is impossible, it could be considered as trading while insolvent or fraudulent trading.

Need to speak to someone?

If you are stressed because you cannot pay your supplier(s), or not certain about how you can move your company to the next level, contacting us as soon as you can is crucial.

Regardless of the problem your company is facing, we can assist you in finding the best way out and take actions that are ideal for your business, whether it’s about closing the company or financing it through the problems. Our service is national and we offer free initial advice.

Give us a call on 0800 975 0380 or email us [email protected]