7 Ways to Write Off HMRC Debt

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Is your business struggling to pay HMRC for VAT or PAYE debt?


It’s a common problem. As business owners we’re forced to become tax collectors for HMRC. We have no choice but to add VAT to our invoices and deduct PAYE from our employees wages and send it on to HMRC.

Sometimes cashflow pressures mean that we can’t send the money to HMRC on time. Maybe a client has been slower than usual to pay. Maybe the bank has lowered our overdraft limit. There are always reasons why it might not be possible to pay HMRC.

If the debt you owe to HMRC for PAYE and VAT has got out of control and you know you’ll never be able to pay it, what are your options?


That depends on whether you want to continue trading or not. If you’ve had enough and don’t want to continue trading then simply close your business down and liquidate it yourself.


  1. Self Liquidation

If your business is solvent, you can sell he assets, collect in the debtors and pay your creditors. Any surplus goes to the shareholders.


    2. Member’s Voluntary Liquidation

A Member’s Voluntary Liquidation is a more formal version of liquidating the Company yourself. You will need to appoint an Insolvency Practitioner to do a Member’s Voluntary Liquidation. The Insolvency Practitioner will sell your Company’s assets and settle the liabilities. He’ll charge a fee for doing this. He has 12 months to sell the assets and pay the creditors. The surplus will go to the shareholders.

     3. Insolvent Liquidation

If your Company doesn’t have enough assets to pay off all the creditors you might have to consider an insolvent liquidation. This will normally be a Creditor’s Voluntary Liquidation. This involves appointing an Insolvency Practitioner who will realise the assets of the Company and pay a dividend to creditors, which will depend on how much he can sell the assets for.

    4. Sell Your Company

You can sell your Company and walk away. Some buyers will pay for your business even if it is insolvent. You might have intangible assets, like your customer base or brand names, that will have value to a buyer. There are also services where unlicensed Insolvency Practitioners will take over your business and wind it down. This can provide some added protection to directors and shareholders.

    5. Creditors Voluntary Arrangement

A Creditor’s Voluntary Arrangement or CVA is a procedure, managed by an Insolvency Practitioner, where your creditors formally agree to be paid less than the full amount that they’re due over an extended period of time. For example, you could offer to pay creditors 50p in the £ over a period of 3 years. Provided at least 75% of your creditors agreed to that, all of them would be bound by it.

    6. Administration

Administration is a formal insolvency procedure normally used by larger companies. In Administration the Company will continue trading and a plan will be put together to save the business, either by a trade sale or a CVA.

    7. Restructure as a new Company

A plan can be put together to restructure your business outside the formal insolvency process. Assets from the old Company can be sold to a new Company at a fair market value, leaving the old, indebted Company behind. This can protect employees and the business going forward and can be much less disruptive and more confidential than the more formal procedures.


All of these 7 methods will write off or delay payment of your HMRC debt. We are experts at putting together and implementing restructuring plans, either by formal insolvency or other methods. Contact us today for a free, confidential consultation.

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