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HMRC pressure – what can the business do?

Where a company faces pressure from creditors, particularly HMRC, and does not have the ability to meet all of these debts as and when they fall due (which is one of the legal definitions of insolvency), then directors have a legal fiduciary duty to protect creditors’ interests by safeguarding the company’s assets and ensuring all creditors are treated equally.

  • it is not unusual for a company or business to have to undergo a wholesale rethink of how it intends to continue trading, where negotiations with HMRC fail;
  • quite often the problem faced is a historical debt legacy problem, where the company or business has returned to profitability but not to the extent so as to enable repayment of this debt to HMRC;
  • alternatively, liquidity may be a temporary problem which is due to expire shortly, in which case it may be more appropriate to approach HMRC with a request for Time to Pay Agreement.

HMRC, as an unsecured creditor, will act no different to any other creditor and will consider reasonable repayment terms but, in the absence of any such proposals, will demand payment immediately. In such circumstances it is the director or individual’s duty to consider whether the payment of one creditor will merely act to reduce the chance of another creditor being paid, or alternatively whether a payment plan can be serviced and will enable the company to continue trading. For a Director, this decision may have personal consequences.

Additionally, in the event of insolvency there is a legal consequence for you personally should you seek to prefer one creditor over the others, and so in such circumstances it is best to consider your debts all together and what other options you have to exit these difficulties.


Quite often the only way to deal with trade creditors or HMRC is to arrange a wholesale refinance of the company’s business, including repayment of any outstanding finance already in place. HMRC (and other creditors) have various powers to enforce their claim very quickly and thus it is important that refinancing arrangements are set up quickly.

Individual or company voluntary arrangements

A company voluntary Arrangement (“CVA”) and an individual voluntary arrangement (“IVA”) both comprise an arrangement made directly with creditors.

  • in summary, for both an IVA and CVA, all of your creditors are provided with a proposal to repay a portion of your debts and provided 75% agree with such proposals, then all of your creditors are bound by the arrangement (whether or not they voted).
  • an IVA and CVA may last for a number of years and will be supervised by an Insolvency Practitioner, who will report to creditors regularly on the progress and provide interim payments of the net sums received from you or your company’s contributions.

Both IVAs and CVAs are described as arrangements with creditors and will not have the same impact as formal insolvency proceedings, and may be a suitable alternative to continuing the struggle of maintaining debt payments with the constant threat of insolvency.

Administration proceedings

For a company, if an offer to your creditors is not a viable option – for example the offered payment is unlikely to be accepted – then formal insolvency proceedings may be the only option.

  • where the company’s business is valuable, and it is only historic debt obligations that are interfering with an otherwise profitable business model, then it may be preferable to place the company into Administration;
  • administration is an insolvency process which enables the company’s business to be sold very quickly as a going concern (rather than the negative impact on the company’s business of winding up the company).

At Francis Wilks & Jones we have considerable expertise in advising on the options when faced by tax demands, whether that be restructuring, company rescue or otherwise. We can also assist in ensuring that advice is provided to protect directors prior to making one of the above decisions.

Please call any member of our Tax Disputes Team or Company Rescue Team for your assistance today. We are here to help.

I was impressed with the quality of the service provided and with how easily accessible and approachable the team was. FWJ’s help meant that I was able to safeguard the jobs of my staff and ensure that my customers had uninterrupted access to services in what was an incredibly difficult time for me. I wish I had instructed them earlier. I cannot recommend them highly enough.

The director of a company that had gone into administration to whom we provided insolvency and restructuring advice

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