Can you write off HMRC tax debt your company cannot afford?
If your company is dealing with escalating HMRC bills and demands for payment, you may be wondering whether it is possible to write off HMRC tax debt in Scotland if you are unable to repay what you owe. While it is possible to write off HMRC debt, this can only be done in specific situations when the company with HMRC debts is being closed down or restructured.
When can HMRC debt be written off?
HMRC tax debt can only be written off as part of a formal insolvency process such as company liquidation or a Company Voluntary Arrangement (CVA). These options are only possible for those companies which are insolvent and therefore unable to pay their debts as and when they fall due.
- Liquidation and HMRC debt – Liquidation brings about the formal end to a limited company which is no longer wanted or needed. For insolvent companies, this is done via a Creditors’ Voluntary Liquidation (CVL) process. As part of a CVL, all assets belonging to the company will be identified and sold so that the proceeds can be used to repay outstanding creditors – including HMRC – as far as possible. Any debts which remain outstanding at this point will be written off and the company will cease to exist as a legal entity. This means any HMRC debt which is unrepayable following the liquidation of the company, will in effect be written off.
- Company Voluntary Arrangements and HMRC debt – A Company Voluntary Arrangement (CVA) functions as a formal repayment plan which is entered into by an indebted limited company and its creditors – which may include HMRC. As part of the process, a licensed insolvency practitioner will be appointed to present a repayment proposal to creditors based on the amount of available income your company has to pay towards its debts. A CVA typically runs for 3-5 years, with any unaffordable debt remaining at the end of the term written off as part of the process. This means some HMRC debts can be written off using a CVA.
What are the other options for dealing with HMRC tax debt in Scotland?
If your company is not technically insolvent, but you are struggling to keep up with your tax bills, you may be able to enter into a formal repayment plan with HMRC known as a Time to Pay arrangement.
While this will not write off any of the tax debt you owe, it will give you the opportunity to repay your liabilities to HMRC through a series of affordable instalments over an agreed period of time, typically up to 12 months.
If you are considering a Time to Pay arrangement as a way to deal with the unaffordable tax debts your company has, you will need to enter into negotiations with HMRC and come to a mutually agreeable monthly repayment amount.
When proposing a repayment plan to HMRC, you need to strike a careful balance between offering enough to satisfy HMRC, while also ensuring the monthly repayment amount is affordable over the course of the term of the arrangement.
You can enter into these discussions yourself, or you can employ the services of licensed insolvency practitioner to handle the negotiations on your behalf.
How Scotland Liquidators can help with HMRC tax debts
If your limited company is struggling under the weight of unmanageable HMRC liabilities, contact the experts at Scotland Liquidators. As a nationwide team of licensed insolvency practitioners, we have the knowledge and expertise to help your company navigate through its toughest times.
To understand your options when it comes to HMRC debts – and to see whether they could be written off – talk to a member of the Scotland Liquidators team today.
