Has your company fallen behind on its PAYE deductions? If your business can’t pay its PAYE taxes on time, it could face scrutiny and pressure – as well as legal action – from HMRC as part of an effort to recover tax arrears.
As an employer, you’re required by law to deduct PAYE from employee payroll as a regular practice. These deductions are used to pay Income Tax to HMRC as a part of your company’s overall taxes.
HMRC is the UK’s most common creditor, and when it’s owed PAYE arrears it takes aggressive action in order to recover the money it’s owed. Failing to pay your PAYE taxes could result in your company being targeted by HMRC through the courts.
While HMRC can be aggressive in pursuing companies with PAYE arrears, it’s also possible to negotiate with HMRC. If your company needs additional time to pay its PAYE arrears, it may be able to negotiate a Time To Pay arrangement.
If your company has PAYE arrears, don’t panic. In this guide, we’ll look at all of the options available for your company to pay its PAYE arrears, as well as the potential consequences of non-payment.
As you pay your employees, you’re required to deduct a certain amount for income taxes and NIC contributions. These deductions are known as PAYE deductions – Pay As You Earn, which is HMRC’s system for collecting Income Tax.
If your company experiences cash flow issues and can’t afford to pay its PAYE taxes to HM Revenue and Customs, it will fall into arrears. This can result in scrutiny from HMRC, which may suspect your company could soon become financially insolvent.
If your company has PAYE arrears, it could face action from HMRC in an attempt to recover the money it owes. This usually begins with a demand letter requiring your company to take immediate action to pay its overdue PAYE tax.
Receiving an HMRC demand letter is a serious event, and one that you can’t afford to ignore as a company director. HMRC often gives companies with PAYE arrears little time to pay their tax arrears – in some cases, as little as one week.
If you ignore the demand letter from HMRC, your company could face court action to liquidate its assets. HMRC deals with thousands of PAYE cases each year and will not waste time in winding up your company if it falls seriously behind on its PAYE tax.
Luckily, there are options available to assist your company. One of the easiest and most effective ways to manage your company’s PAYE arrears is to enter into a Time To Pay arrangement with HMRC.
If your company can’t afford to pay its PAYE arrears to HMRC, there’s a very great possibility that it’s insolvent. Failing to take action after discovering your company is insolvent could result in wrongful or fraudulent trading charges against you.
As your company’s director, you need to take immediate action in the event that your company becomes insolvent due to its PAYE arrears. Failure to pay tax could also lead to your company receiving a Personal Liability Notice from HMRC.
Receiving a demand letter or notice from HMRC is a serious event, and you need to take action immediately. Several solutions are available to protect your company against court action from HMRC, ranging from Time To Pay to administration.
Companies with PAYE arrears have several options. If your company is solvent and has sufficient cash flow to pay its tax arrears and continue operating, it can make a payment to HMRC upon receiving a demand letter to ease the pressure it’s under.
If your company is solvent but can’t afford to pay its taxes due to cash flow issues that will prevent it from operating or affect its financial position, it can attempt to enter into a Time To Pay arrangement with HMRC.
Your company can also use emergency financing to raise cash in order to pay off its PAYE arrears. Emergency cash flow solutions such as invoice factoring can be used to generate sufficient short-term cash flow to pay HMRC.
A Time To Pay arrangement gives your company additional time to pay its overdue taxes to HMRC, often as part of a long-term payment plan. This lets your company pay off its PAYE arrears without negatively affecting short-term cash flow.
In the event that your company is insolvent, it can also enter into administration. A company that’s in administration is shielded from legal action by HMRC, such as an attempt to wind up the company and force it into compulsory liquidation.
Coming under pressure from HMRC due to unpaid PAYE tax can be a stressful and difficult experience. As a company director, it’s important that you don’t panic and focus on taking immediate action to protect your business.
We’ve assisted hundreds of UK businesses with serious PAYE arrears reach a long-term agreement with HMRC. Contact us now to learn about the options available to your business to settle its PAYE arrears and avoid legal action from HMRC.
We have a team of advisers who have helped hundreds of businesses around the UK that have faced financial pressures on every scale. You are not alone.