Owing HMRC is common. Ignoring it is the real risk
Tax arrears build up for all sorts of reasons: a late customer payment, a bigger Self Assessment bill than expected, VAT collected but spent on running costs, or PAYE falling behind during a quiet spell. HMRC's guidance on difficulties paying confirms that if you cannot pay in full you may be able to agree a payment plan, but HMRC will check that the plan is affordable. If no plan is agreed, HMRC will ask for the full amount.
Interest is charged on late-paid tax at the Bank of England base rate plus 4%, and late payment penalties can apply on top, so the sooner arrears are dealt with, the less they cost.
Which taxes this covers
- Self Assessment balancing payments and payments on account
- Corporation Tax
- VAT
- PAYE and National Insurance owed by employers
- Tax arising from a compliance check settlement or a voluntary disclosure
Some smaller debts can be set up through HMRC's online service; others require a conversation with HMRC. Either way, the request goes better when the numbers are ready.
How we help you prepare
- Confirm what is owed. We check HMRC's figures against your returns and records. Sometimes the debt is overstated because a return has not been filed and HMRC has estimated the tax.
- Bring filings up to date. HMRC is unlikely to agree a plan while returns are outstanding, so we prepare any missing returns first.
- Build an affordability picture. For a business, that means a short-term cash flow forecast showing income, essential costs and what can realistically go to HMRC each month. For individuals, it means a clear summary of income and outgoings.
- Prepare the proposal, including what has caused the problem, what has changed, and how future tax will be paid on time alongside the arrears.
- Support the approach to HMRC and help you respond to any questions HMRC raises about the proposal.
We cannot guarantee HMRC will accept a particular arrangement, and we will not encourage a plan that is unlikely to be kept. A missed instalment can lead HMRC to cancel the arrangement, so we focus on an offer you can actually maintain.
What we'll need from you
Recent HMRC statements or letters, your latest accounts or tax returns, bank statements for the last few months, a list of regular outgoings and any other debts, and details of income you expect over the coming months. If your records are behind, we can start with a bookkeeping catch-up so the figures stand up.
Stopping it happening again
Once a plan is in place, we can help you set money aside for future bills, check whether your VAT scheme still suits you, and give you a calendar of payment dates. If the arrears came from an HMRC enquiry, we can help with that side too.
We work with sole traders, directors and small companies across Kent, including Medway and Folkestone, and everything can be handled remotely. Request a call back and tell us roughly what is owed and to whom.
Frequently asked questions
Will HMRC charge interest during a Time to Pay arrangement?
Yes. Interest continues to run on tax paid after its due date, including tax being paid under an arrangement. This is why we look carefully at how quickly the debt can be cleared without putting the business or household under impossible pressure. A slightly shorter plan can noticeably reduce the total interest you pay.
Can I set up a payment plan online myself?
HMRC offers online payment plans for some debts, subject to conditions on the type and size of debt and whether your returns are up to date. If you qualify, it can be the quickest route. Larger or more complicated arrears usually need a direct approach to HMRC, and that is where preparing an affordability case properly makes the biggest difference.
What happens if I miss an instalment?
HMRC may cancel the arrangement and ask for the remaining balance in full, and could start recovery action. If you can see a missed payment coming, contact HMRC before it happens. We can help you explain what has changed and, where possible, propose revised terms rather than letting the arrangement fail.
Do my returns need to be filed before HMRC will agree a plan?
In most cases, yes. HMRC generally expects outstanding returns to be submitted so it knows the real amount due. Unfiled returns can also mean HMRC has estimated your liability, which may be higher than the true figure. We usually prepare any missing returns as the first step.
Tax Arrears and Time to Pay Support across Kent
We help clients throughout the county, including: