What should directors do about HMRC arrears?
Tax arrears often indicate that working capital is being used to support continuing trade. A credible response requires more than agreeing an instalment that the company cannot sustain.
6 min read · Last reviewed August 2026Establish the complete tax position
The board should understand the taxes, periods, returns, penalties and enforcement stage involved.
- PAYE and National Insurance
- VAT
- Corporation Tax
- Outstanding returns and assessments
- Existing Time to Pay terms
Test future affordability
Any proposal must allow the company to pay current taxes as they arise as well as reduce historic arrears. Forecasts should include seasonal movements and realistic downside assumptions.
Consider the alternatives
If the company cannot maintain future compliance, a Time to Pay arrangement may only delay the underlying problem. Restructuring, a CVA, administration or closure may need to be considered.
Common questions
Will HMRC agree to Time to Pay?
That depends on affordability, compliance history, the information provided and the credibility of the proposal.
What if HMRC threatens a petition?
The matter becomes time-sensitive and the company should take legal and insolvency advice immediately.
This guide is general information only and does not constitute insolvency, legal, tax or financial advice. The position should be reviewed using the company's current facts and documents.