Every UK business has a legal responsibility to pay its tax bills, whether that’s VAT, corporation tax, PAYE, or income tax for self-employed individuals. But for many, there comes a time when those payments feel out of reach. Perhaps it’s a tough trading period, cash flow is squeezed, or an unexpected cost throws everything off.
So what happens if your business cannot pay HMRC?
In this guide, we break down what you need to know, from the types of tax bills your business might face to the consequences of non-payment, and most importantly, the smart steps you can take to stay in control.
Common HMRC Bills Businesses Face
Even small businesses can face multiple bills from HMRC across the year. These typically include:
- VAT (Value Added Tax): Collected on sales and paid quarterly
- Corporation Tax: Paid annually based on profits
- PAYE and National Insurance: Deductions for employees, paid monthly
- Self-Assessment Tax: For sole traders and directors with additional income
- CIS Deductions: For construction businesses operating under the Construction Industry Scheme
Each of these comes with its own deadline and payment schedule, and missing one can start a chain reaction of costs and complications.
Why Businesses Struggle to Pay HMRC Bills
Falling behind on tax payments is not always about poor financial management. There are many common and understandable reasons why businesses struggle to pay HMRC on time, including:
- Cash flow issues: Money might be tied up in unpaid invoices or seasonal dips in revenue. If you’re a beach side restaurant for example, cash flow will be much stronger in the summer compared to the winter.
- Unexpected expenses: Equipment repairs, stock shortages, or last-minute costs can eat into funds set aside for tax. This can be common in construction businesses.
- Rapid growth: Fast-expanding businesses may reinvest profits, leaving little for tax
- Poor forecasting: Underestimating your tax bill or not planning for payment dates
- Late client payments: Especially for B2B businesses, payment delays can derail your tax schedule
What Happens If You Don’t Pay HMRC
If you miss a tax payment, HMRC does not wait around. They follow a structured escalation process that can cause long-term harm to your business if not addressed quickly:
- Interest: Accrued daily from the moment your payment is late
- Penalties: Fixed penalties or a percentage of the unpaid tax
- Late payment surcharges: Additional fines if you continue to delay
- Debt collection: HMRC can use enforcement agents or take legal action
- Asset seizure: In serious cases, they may seize goods or funds directly from your bank
- Winding-up orders: If the debt remains unpaid, HMRC can apply to close your company down
All of this adds stress, disrupts operations, and can damage your reputation and credit.
Common HMRC Penalties and How to Avoid Them
Understanding the risks can help you avoid them. Here are some of the most common penalties and how to steer clear of them:
Late VAT Returns and Payments
HMRC uses a points-based system. One missed return might not trigger a fine, but repeated issues will. Always submit returns on time, even if you cannot pay right away.
Corporation Tax Non-Payment
If you miss the nine-month post-year-end deadline, you will face interest and potential enforcement. Plan ahead for this large annual bill.
PAYE Arrears
Monthly deadlines for PAYE and NI must be met. If not, penalties and interest can build quickly, affecting your employees’ HMRC records.
How to avoid them:
- Set calendar reminders
- Use accounting software with alerts
- Get ahead with a monthly savings plan
- Use a short-term business loan to spread the cost
What You Can Do If You Cannot Pay
If your business is facing an HMRC bill you cannot afford, don’t panic, but don’t ignore it either. There are steps you can take:
1. Speak to HMRC Early
They may allow a Time to Pay (TTP) arrangement, which spreads the bill over a few months. However, this is not guaranteed and can affect your credit if you miss a payment.
2. Review Your Cash Flow
Identify what can be cut or paused temporarily. Freeing up working capital may help you cover the shortfall.
3. Consider External Funding
A VAT loan or corporation tax loan can give you immediate funds to pay HMRC in full and avoid penalties. You then repay the lender in manageable instalments over time.
How VAT and Corporation Tax Loans Can Help
Using a dedicated tax loan is a smart way to keep your business running smoothly without falling foul of HMRC. These loans are:
- Quick to arrange: Match Finance can secure funding fast
- Flexible: Choose repayment terms that work for your business
- Cash flow friendly: Avoid large lump sums and spread the cost
- Penalty avoiding: Pay your bill on time and keep your record clean
Support from Match Finance
At Match Finance, we work with businesses across the UK to secure VAT loans and corporation tax loans when they need them most. Whether you have a payment due tomorrow or want to plan ahead for your next tax deadline, our team is ready to help.
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Avoid Penalties and Keep Business Moving
Falling behind on HMRC bills can feel overwhelming, but you are not out of options. By acting early, understanding your liabilities, and considering smart funding solutions, you can stay compliant without sacrificing cash flow or business stability.
A short-term VAT or corporation tax loan from Match Finance can help you meet your obligations on time, avoid penalties, and get back to focusing on what matters, which is growing your business.
For more information on this, or our other loans such as unsecured business loans, merchant cash advances, asset finance, and more, then get in touch today.
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