HMRC is actively pursuing £27.1 billion in overdue business tax. Licensed Insolvency Practitioners are already fielding enquiries as pressure on businesses mounts.
HMRC's pursuit of overdue business tax is intensifying, and for directors carrying significant tax arrears, the window to act is narrowing. Insolvency Practitioners across the UK are already seeing the impact.
HMRC’s Crackdown On Unpaid Business Tax
HMRC has long been viewed as a patient creditor, particularly in the years following the pandemic when many businesses accumulated significant tax arrears. That patience is no longer guaranteed.
A recent freedom of information request revealed that HMRC is actively pursuing £27.1 billion in overdue business tax, comprising £6.1 billion in corporation tax, £12.4 billion in VAT, and £8.5 billion in PAYE. The agency has confirmed it has a duty to collect what it is owed, and the pace of enforcement is increasing.
For Insolvency Practitioners working with business directors across the UK, this shift is already being felt. Julie Palmer, a veteran licensed Insolvency Practitioner who features in our directory, has noted the influx in enquiries from clients asking for help negotiating with HMRC. It is a pattern being seen more widely, with many businesses carrying HMRC debt as a significant proportion of their overall liabilities.
"We are receiving enquiries from clients asking if we can help them negotiate with HMRC. This ramp-up of HMRC chasing debts has been well-documented and it is highly likely that we will see an influx in enquiries of this nature."
Julie Palmer, Licensed Insolvency PractitionerWhy is this happening now?
HMRC extended considerable flexibility to businesses during and after the pandemic, allowing tax debts to accumulate through Time to Pay arrangements and deferred payments. That period of forbearance is drawing to a close.
Around 14% of the £27.1 billion is currently held within 172,000 Time to Pay arrangements, totalling £3.8 billion. While these arrangements provide temporary breathing space, they are not a long-term solution, and HMRC is under increasing pressure to recover outstanding sums.
Which businesses are most at risk?
Julie Palmer has warned that the ramp-up in HMRC debt collection is highly likely to cause a number of heavily indebted companies to fail, particularly those described as 'zombie' businesses, companies that have been surviving on deferred obligations rather than genuine financial recovery.
These are businesses that may appear to be trading normally but are carrying tax debts they have no realistic plan to repay. For their directors, HMRC taking formal enforcement action, whether that is a winding-up petition or the appointment of a debt management officer, can come without much warning.
When should a director seek professional advice?
For directors carrying significant tax arrears, whether that is an overdue VAT bill, a PAYE shortfall, or corporation tax that has been deferred since the pandemic, professional insolvency advice must be sought without delay.
The clearest trigger is correspondence from HMRC indicating that a Time to Pay arrangement is at risk, that a debt has been passed to a field force officer, or that a winding up petition is being considered. At any of these stages, speaking to a licensed Insolvency Practitioner is appropriate.
However, the directors who tend to achieve the best outcomes are those who seek advice before HMRC reaches that point. A licensed Insolvency Practitioner works with business directors carrying HMRC debt on a regular basis. They understand how HMRC operates, their appetite for debt negotiations, and how a company's tax position fits into its broader financial picture.
