HMRC have published a new policy paper, 'Tax debt, government lending schemes and Company Voluntary Arrangements (CVAs)' on the collection of tax debts from businesses as the support schemes from the pandemic start to wind down and the moratorium on company winding-up petitions comes to an end in September.

 The paper is a continuation from HMRC's previous policy paper 'Collecting debts as we emerge from Coronavirus (COVID-19)'. This time there is more of a focus on tax debts owed by businesses in particular.

  • HMRC are keen to point out that they will be as understanding and supportive as possible. They will offer practical support to those who are experiencing difficulties paying their tax, including the ability to pay off the debt in instalments through Time to Pay.
  • HMRC expect businesses who are struggling to make use of all the Financial help available, such as the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS) and the Recovery Loan Scheme:
    • These schemes offer flexibility with repayments and with certain lenders offering repayment holidays or extended repayment terms. The payment of tax debt can then be prioritised over loan repayments. 
    • Alternatively, any funding received can be used to pay the debt directly.
    • The existence of such finance will not stop HMRC from pursuing debt collection.
  • Whilst being as supportive and flexible as possible, HMRC have stated that where there is little chance of recovery, they have a duty to everyone including other viable businesses to ensure debts are recovered even if it means Insolvency for the business in question:
    • This approach coincides with the lifting of the moratorium on creditors using petitions to the court to have companies wound up comes to an end in September 2021.
    • HMRC have confirmed that they will support fair and honest Company Voluntary Arrangements where possible.
    • From 1 December 2020, HMRC became a secondary preferential creditor for VAT, PAYE, NICs, student loan repayments and CIS deductions, where such payments had been withheld from HMRC.

Useful guides on this topic

Time to Pay agreement
Business and self-employed taxpayers with outstanding tax liabilities may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.

Ceasing trading: What are your options?
What are your options if you are going to cease trading? What processes must be followed if you want to close down a company? What are the tax, company and insolvency law requirements?

Company Voluntary Arrangement (CVA)
As a result of the 2002 Enterprise Act, there are two main ways of trying to rescue or save all or part of a company that is in financial difficulties. These are by Company Voluntary Arrangement (CVA) or by Administration.

External link

Policy paper: Tax debt, government lending schemes and Company Voluntary Arrangements (CVAs)

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