Company Closure: HMRC Debts
If your limited company owes HMRC and cannot afford to pay, you may still be able to close it, but it needs to be handled properly.
HMRC debts can include VAT, PAYE, Corporation Tax, penalties, interest or more than one type of tax arrears. If the company cannot pay what it owes, it may be insolvent. In that situation, trying to close the company using voluntary strike-off is unlikely to be the right route, and HMRC may object.
Anderson Brookes helps company directors understand their options, deal with HMRC pressure and close insolvent companies through the correct process where appropriate.
Get help with:
Worried about HMRC debt?
If your company owes HMRC, get clear advice before the pressure escalates. Leave your details and our expert team will get in touch.
Can I close my company with HMRC debts?
Yes, you can close a company with outstanding HMRC tax debts, but it must be done through the right process.
If the company owes HMRC and can’t pay, voluntary strike-off is usually not suitable. HMRC is a creditor and can object to the company being removed from the Companies House register. If the company is insolvent, a formal insolvency procedure is usually needed.
For many directors, the correct route is a Creditors’ Voluntary Liquidation, often called a CVL. This is a formal process led by a licensed insolvency practitioner. The company is wound up, its position is reviewed, any assets are dealt with properly and creditors are handled through the liquidation process.
A CVL can help directors take control before HMRC pressure escalates further. It also shows that you have taken formal steps to deal with the company’s position rather than trying to ignore or avoid the debt.
HMRC debt? Get a clear action plan
Answer a few quick questions and we’ll help you understand your next steps.
Why DS01 or strike-off can be risky with HMRC debts
A DS01 strike-off application is designed for companies that are eligible to be removed from the register. It is not a way to avoid company debts.
If your company owes HMRC, has unpaid returns, is still trading, has creditor pressure or cannot pay debts as they fall due, strike-off may be blocked. HMRC may object, and the company can remain on the register while the debt is pursued.
Directors should be especially careful if the company has:
- unpaid VAT
- PAYE or National Insurance arrears
- unpaid Corporation Tax
- missing HMRC returns
- a failed Time to Pay arrangement
- creditor pressure or legal threats
- continued trading while unable to pay debts
If any of these apply, get advice before filing DS01 or continuing with a strike-off application.
VAT debt
VAT debt is one of the most common HMRC problems directors face when a company is struggling.
If your company has collected VAT but cannot pay it to HMRC, this can become a serious issue. HMRC may chase the company, add interest or penalties, object to strike-off or take further enforcement action if the debt remains unpaid.
If the company cannot afford to clear the VAT arrears, a formal insolvency route such as CVL may need to be considered. This allows the company’s position to be dealt with properly, rather than leaving the debt unresolved.
PAYE debt
PAYE and National Insurance arrears can build quickly, especially where wages have continued to be paid while cash flow has deteriorated.
If PAYE or employee deductions have not been paid to HMRC, the company should not simply be struck off without dealing with the issue. HMRC may object to the closure and continue recovery action.
Directors should take advice early if PAYE arrears are part of a wider cash flow problem, particularly if the company is still trading, has employees or cannot keep up with current tax obligations.
Corporation Tax debt
Corporation Tax arrears can arise when a company has made a profit in a previous period but no longer has the money available to pay the tax due.
If the company cannot pay Corporation Tax, HMRC may issue reminders, charge interest or penalties, object to strike-off or take further action. The right option depends on whether the company is still viable, whether it can repay the debt over time and whether there are other creditors.
If the business cannot realistically recover or repay what it owes, liquidation may be the appropriate route.
Multiple HMRC debts
Many directors are not dealing with one HMRC debt in isolation. VAT, PAYE, Corporation Tax, penalties and interest can overlap, especially if the company has been under pressure for some time.
Where more than one HMRC debt is involved, it is important to understand the full position before taking action. A Time to Pay arrangement may be possible in some cases, but if the company cannot afford ongoing payments, cannot keep up with new tax liabilities or has already broken an arrangement, a formal insolvency option may be more realistic.
This is where specialist advice helps. A licensed insolvency practitioner can review the company’s position and explain whether rescue, repayment, liquidation or another route is suitable.
Get your HMRC debt action plan
Tell us what type of HMRC debt is involved and whether HMRC has already contacted you. We’ll review your answers and contact you confidentially to discuss your options.
Free confidential advice. No obligation. No pressure. Speak to a specialist. Same-day callback where possible.
Dealing with creditor pressure?
HMRC pressure often comes alongside wider creditor pressure. You may also be dealing with suppliers, lenders, landlords, Bounce Back Loan concerns, unpaid trade accounts or threatening letters.
If creditors are chasing and the company cannot pay, the priority is to avoid making the position worse. Directors should be careful about continuing to trade, moving assets, paying one creditor ahead of others or taking informal steps that could later be questioned.
If HMRC or another creditor is threatening legal action, early advice can help you understand whether the company can be rescued, whether a payment plan is realistic or whether liquidation would give a cleaner and more controlled route forward.
What are your options if your company has HMRC debts?
The right option depends on whether the company is still viable, how much is owed, whether HMRC has already taken action and whether the business can afford future tax payments.
Time to Pay
A Time to Pay arrangement may be possible if the company can afford regular repayments and remain up to date with future tax. This is usually more realistic where the company is still viable and the debt problem is temporary.
If a Time to Pay arrangement has already failed, or the company cannot afford the payments, it may not be the safest option.
Creditors’ Voluntary Liquidation
A Creditors’ Voluntary Liquidation is often the most appropriate route when a company cannot pay HMRC or other creditors and has no realistic prospect of recovery.
A licensed insolvency practitioner is appointed, the company is placed into liquidation, assets are dealt with properly and creditors are handled through the formal process. For directors, it can provide a controlled way to close the company and move forward.
Company rescue or restructuring
In some cases, the company may still be viable if pressure is managed quickly. If there is a realistic route to recovery, options could include negotiation, repayment planning or other restructuring advice.
The key is to take advice before HMRC pressure becomes unmanageable.
Compulsory liquidation
If HMRC or another creditor takes court action, the company could be forced into liquidation. This is usually more stressful and gives directors less control over the timing and process.
If you have received threats of legal action, a winding-up petition or formal HMRC enforcement letters, seek advice quickly.
Why Directors Choose Anderson Brookes
With more than 25 years’ experience and thousands of directors helped, we’re trusted by business owners across the UK. You can speak directly with an expert insolvency practitioner and we’ll help you understand your options clearly and quickly. We specialise in working with small and medium businesses and we understand your perspective and priorities.
Ready to
move on?
If you’re ready to close your company, stop creditor pressure, or just want to understand your next steps, we’re here to talk.
Call us now on 0800 1804 935 or request a call back - we’re here to help.
What responsibilities does a director have?
When a company is insolvent, directors need to be careful. Your duties move towards protecting creditors, not just shareholders.
This can mean:
- avoiding further trading if it increases creditor losses
- not moving, selling or hiding company assets
- not paying one creditor unfairly ahead of others
- keeping accurate company records
- taking advice from a licensed insolvency practitioner
- avoiding decisions that could increase personal risk
Most company debts remain company debts. However, personal risk can arise in some circumstances, including personal guarantees, overdrawn director loan accounts, wrongful trading, misfeasance or improper use of company funds.
If you are worried that HMRC debt or other company debt could affect you personally, take advice before making your next move.
What if HMRC has already contacted you?
If HMRC has already sent letters, demanded payment, rejected a Time to Pay proposal or threatened enforcement, it is important not to ignore the position.
The sooner you understand your options, the more control you are likely to have. You may still be able to avoid compulsory liquidation, reduce the risk of further creditor action and choose the right closure route for the company.
HMRC pressure building?
Get clear advice before taking action. We’ll help you understand whether repayment, rescue or liquidation is the most suitable route.
What if the company has no assets?
You can still close an insolvent company through CVL even if there are no assets to sell.
In some cases, directors fund the liquidation personally. In others, there may be options to explore depending on the company’s circumstances and the director’s position. Anderson Brookes can talk you through the practical options and explain what is likely to happen next.
Don’t assume that having no assets means there is nothing to do. If the company owes HMRC or other creditors, it still needs to be dealt with correctly.
Why speak to Anderson Brookes?
Anderson Brookes is a firm of licensed insolvency practitioners. We work directly with company directors to explain their options, manage the process and help them deal with business debt in a clear and regulated way.
You can speak to us confidentially about HMRC arrears, VAT, PAYE, Corporation Tax, creditor pressure, company closure and liquidation. We’ll help you understand the safest next step before the situation escalates further.
- Licensed insolvency practitioners
- Free confidential initial advice
- Clear guidance for company directors
- Support with HMRC arrears and creditor pressure
- Practical advice on CVL, Time to Pay and closure options
- Same-day callback where possible
Frequently asked questions
Can I close a limited company if it owes HMRC?
Yes, but the company needs to be closed in the right way. If it cannot pay HMRC, it may be insolvent, and voluntary strike-off is unlikely to be appropriate. A formal process such as Creditors’ Voluntary Liquidation may be needed.
Can HMRC object to company strike-off?
Yes. HMRC can object if the company owes tax, has missing returns or if there are other unresolved matters. If HMRC objects, the company may remain on the register while the debt is pursued.
Can I use DS01 if my company owes VAT or PAYE?
You should take advice before using DS01 if the company owes VAT, PAYE, Corporation Tax or any other creditor. Strike-off is not designed as a route for avoiding unpaid company debts.
What happens to HMRC debt in liquidation?
In liquidation, company debts are handled through the formal insolvency process. The liquidator reviews the company’s position, deals with assets and communicates with creditors, including HMRC. Any outcome depends on the company’s assets, liabilities and circumstances.
Can HMRC debt become personal?
Most limited company debts belong to the company, not the director personally. However, personal risk can arise in certain situations, including personal guarantees, overdrawn director loan accounts, wrongful trading or improper conduct. If you are worried about personal liability, get advice before taking further action.
What if I have a failed Time to Pay arrangement?
If a Time to Pay arrangement has failed, HMRC may be less willing to agree further repayment terms. You should review whether the company can realistically continue trading and whether liquidation or another formal route is now more appropriate.
What if the company has no money to pay for liquidation?
There may still be options. Some directors fund the process personally, while others may need advice on the practical routes available. Speak to Anderson Brookes and we can explain what may be possible based on your circumstances.
Take the first step today
If your company owes HMRC, the best thing you can do is get clear advice before taking further action.
Whether you are dealing with VAT, PAYE, Corporation Tax, multiple HMRC debts or creditor pressure, Anderson Brookes can help you understand your position and decide what to do next.
Free confidential advice • No obligation • No pressure • Speak to a specialist • Same-day callback where possible
