Company HMRC debt: VAT, PAYE and tax arrears
Unpaid tax is the most common reason UK companies end up in formal insolvency, and HMRC presents more winding-up petitions than any other creditor. Company tax arrears usually build up across VAT, PAYE and National Insurance, and Corporation Tax. HMRC has strong powers: it can issue a statutory demand, present a winding-up petition, use enforcement by taking control of goods, and in some cases make directors personally liable, for example through a Personal Liability Notice for unpaid National Insurance or where there is evidence of deliberate behaviour. The good news is that HMRC would usually rather be paid over time than force a company under, so a realistic Time to Pay arrangement, typically up to 12 months, is often available if you engage early and honestly. Ignoring HMRC is the single worst option. If the arrears are unaffordable, a practitioner can explain rescue or closure routes before HMRC escalates. HMRC; gov.uk Time to Pay
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At a glance
| HMRC step | What it means | Your move |
|---|---|---|
| Statutory demand | A formal demand, usually giving 21 days to pay | Check affordability and engage before it escalates |
| Winding-up petition | HMRC presents more petitions than any other creditor | Same-day advice: see the winding-up petition guide |
| Taking control of goods | Enforcement against company assets | Engage early: HMRC is far more flexible before enforcement |
| Personal Liability Notice | Possible for some unpaid National Insurance or deliberate behaviour | Take advice if you are worried about personal risk |
Engage early, before enforcement
HMRC is far more flexible before it escalates. A Time to Pay arrangement spreads the debt if you can show the company can afford it. Use our Time to Pay affordability calculator to see what is realistic before you call them. If the debt has already been passed out, see the nine debt collection agencies HMRC uses and what they can and cannot do, and our guide to Corporation Tax arrears for that specific tax.
When the arrears are unaffordable
The numbers behind this
See the live official figures on our HMRC tax debt tracker. The current stock of tax debt owed to HMRC and Time to Pay arrangement numbers. All figures come from named official sources on our UK business distress data hub.
Common questions
Can I be personally liable for company tax debt?
Usually no, but there are exceptions: HMRC can issue Personal Liability Notices for some unpaid National Insurance, and pursue directors where there is evidence of fraud or deliberate default. Take advice if you are worried.
Will HMRC agree to Time to Pay?
Often yes if you engage early and the plan is realistic and affordable, usually over up to 12 months. It helps to know your numbers first, which is what our affordability tool is for.
What is a statutory demand from HMRC?
A formal demand for a debt, usually giving 21 days to pay before HMRC can petition to wind the company up. It is a serious warning to get advice immediately.