Here’s why HMRC is the largest creditor in the UK


HMRC is the largest single business creditor in the UK, and there can be several possible reasons for the same. Usually, businesses like to pay the suppliers in time, and since HMRC tax dues are paid in instalments, the flexibility is retained. Below are some quick things.

Numbers and more

According to a report by Enterprise Tax Consultants, HMRC was the single largest creditor in over 60% of liquidations in 2017, which is a sharp increase of around 11% compared to the same figure five years back. While the compulsory liquidations decreased in 2017, tax compliance matters remained a matter of concern for small and growing businesses. It was also noticed that HMRC claims had also increased by 50%.

Different HMRC debts

  • HMRC VAT arrears. When it comes to HMRC VAT arrears, many companies are not aware of the consequences of not paying the same in time. It is important to comprehend HMRC VAT arrears and penalties in detail.
  • Corporation tax. This is the tax on annual income, and most businesses are aware of the same right when the company is registration. The dues related to corporation tax must be paid on time.
  • PAYE. This is the amount that employers must collect for tax and payments made to National Insurance Contributions by the employees. The payments are due to HMRC monthly, and in case of delays, the same must be mentioned in advance.

Managing HMRC debts

Businesses can opt for Pay Arrangement (TTP)” plan for HMRC debts, which allows them to repay the dues in a period spanning between six and twelve months. While longer arrangements are possible, it is extremely important to consider professional advice in this regard, and even HMRC may have its reservations.

Evaluating the role of HMRC

HMRC’s role is not limited to just collecting taxes, but they are equally focused on enforcements, which matter in collecting debts in time. Their role may require them to do the following

  • Stop owned debts from escalating
  • Close companies that are not paying taxes
  • Set examples where need be.

For companies that are dealing with cash crunch, HMRC may ask for security bond. Various departments of HMRC are involved in tax collection, while the Securities Team handles the need for sending Notice of Requirement. Also, they can send enforcement officers to collect tax and seize goods as required, and for this, they don’t need a court permission in advance. More details on this can be found here.

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