HMRC debt collection is the process HM Revenue & Customs uses to recover unpaid taxes from companies. If your business has fallen behind with VAT, PAYE or Corporation Tax, HMRC will pursue those arrears firmly. They are not like an ordinary creditor. They have extensive powers to investigate, demand payment and take enforcement action.
For directors, this can be daunting. Missed tax payments are often the first sign of cash-flow strain, and once HMRC begins formal recovery action, options become limited.
How HMRC collects company tax debt
When a company falls behind, HMRC typically follows a pattern of escalating action:
- Reminder letters and payment demands – initial attempts to get the company back on track.
- Debt collection agencies – HMRC uses third-party firms to chase tax arrears.
- Bailiffs (enforcement officers) – HMRC can instruct enforcement officers to seize company assets if debts remain unpaid.
- Court action – this could mean a statutory demand, winding-up petition or even Compulsory Liquidation of the company.
At each stage, the pressure increases. HMRC rarely forgets about debts, so ignoring letters or phone calls can make things worse.
How long can HMRC chase company debts?
Company tax debts don’t simply disappear. HMRC can normally chase unpaid VAT, PAYE or Corporation Tax for at least six years, but in some cases much longer — especially where they believe there has been fraud or deliberate avoidance.
This means questions like “Can HMRC chase a 10 year old debt?” matter. In practice, yes, they can, particularly if the debt relates to tax returns that were never filed or if there was wrongdoing.
Does HMRC debt ever get written off?
It’s a common belief that HMRC debt will eventually be written off. The reality is different. HMRC will only write off debts if there is a formal process in place, such as liquidation. For companies, the main routes where HMRC debt can be cleared are:
Time to Pay (TTP) arrangement: You can negotiate a Time to Pay arrangement directly with HMRC to spread tax arrears over 6–12 months. This only works if the company is otherwise viable and you engage early. Debts are not written off but they could be made more manageable.
Company Voluntary Arrangement (CVA): Debt is repaid in instalments, with the potential for some to be written off at the end, if that’s part of the official arrangement.
Creditors’ Voluntary Liquidation (CVL): The company closes and the assets liquidated to repay creditors as much as possible. Remaining debts, including tax arrears, could be written off, if you’re found to have met your director’s duties.
Administration: An insolvency practitioner steps in and may restructure the company or sell parts of it, potentially reducing HMRC’s claim. But this isn’t guaranteed.
HMRC debt collection vs personal HMRC debts
It’s important to separate company tax arrears from personal tax debts. With a limited company, liability usually rests with the business, not you personally. That said, personal exposure can arise if you’ve signed a personal guarantee on a business loan, are unable to pay an overdrawn director’s loan account, or continued trading while insolvent.
Key takeaways for HMRC debt collection
- HMRC debt collection is the process of recovering unpaid company tax such as VAT, PAYE and Corporation Tax.
- HMRC can chase company debts for six years or more, and they rarely write them off outside insolvency.
- Enforcement ranges from debt collectors and bailiffs to winding-up petitions.
- Directors are usually protected by limited liability, but misconduct can change that.
- Formal processes like CVAs, administration and CVLs provide a structured way to deal with HMRC debts.
We’re here to help you understand ‘what is HMRC debt collection?’
HMRC is known for escalating quickly if debts are ignored. They don’t need to rely on court judgments in the same way as other creditors, and they are often the first to push for a winding up petition against companies. The sooner you act, the more solutions are available.
If HMRC debt collection is putting your company under pressure, don’t wait for enforcement to escalate. Our licensed insolvency practitioners can explain your position, outline your options and guide you through the safest next step — whether that’s negotiating a repayment plan, restructuring, or closing the company properly.
Get in touch today for free, confidential advice and take back control of your situation.
