Company VAT arrears
VAT arrears are among the most dangerous debts a company can carry, because the money was collected from your customers on HMRC's behalf and then spent on cash flow, and HMRC treats unpaid VAT very seriously. It is one of the most common triggers for HMRC enforcement and, ultimately, a winding-up petition. If you cannot pay a VAT bill, the worst thing you can do is file the return late or not at all and go quiet. The better path is to file on time even if you cannot pay, then contact HMRC quickly to propose a Time to Pay arrangement, usually over up to twelve months, backed by realistic figures. Persistent VAT arrears alongside other tax debt is also a strong signal that the company may need formal rescue or an orderly closure. Acting early, while HMRC is still willing to talk, gives you far more room than waiting for a demand. HMRC, gov.uk
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File on time, then talk to HMRC
Late or missing returns make everything worse and add penalties. File on time, then propose a realistic plan. Use our Time to Pay affordability calculator to work out what you can sustain before you call.
The numbers behind this
See the live official figures on our HMRC tax debt tracker. The scale of tax debt owed to HMRC, VAT included, and Time to Pay volumes. All figures come from named official sources on our UK business distress data hub.
Common questions
Can I go to prison for unpaid VAT?
Simply being unable to pay VAT is not a crime; it is a debt. Deliberate VAT fraud is different and serious. If the company genuinely cannot pay, engage with HMRC and take advice, do not hide.
Will HMRC accept a payment plan for VAT?
Often yes if you engage early and the plan is realistic and affordable, usually over up to 12 months, and you keep filing and paying current VAT on time.