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Your options if you’re struggling to pay VAT

09/08/2021

When cash flow problems arise, you may find that you struggle to pay your bills. But, what should you do if you can’t afford to pay VAT?

Failing to pay VAT can result in serious sanctions including director disqualifications, asset seizures and winding-up petitions.

Therefore, businesses must do all they can to keep on top of tax commitments and avoid being pursued by HMRC – and act quickly and appropriately in the event you can’t meet a certain deadline.

If your business is struggling to pay VAT, these options could help:

1. Talk to HMRC

If you’re unable to pay your VAT you may be able to set up a Time to Pay Arrangement. This lets you spread the cost of your tax bill by paying what you owe in instalments.

To do this you should contact HMRC as soon as possible, ideally before you miss a payment. This allows you time to negotiate with them early and demonstrates that you have acted appropriately as a director.

HMRC’s Business Payment support services telephone number is 0300 200 3835. It’s open from 8am to 6pm Monday to Friday, but closed at weekends and on bank holidays.

When you contact HMRC they will ask you about your income, expenditure, assets and what you’re doing to get your tax payments back in order. They may ask for evidence of this.

Using this information HMRC will decide whether you should be able to pay.

You’ll have to pay any outstanding balances immediately if HMRC think you can when you call. If you don’t, HMRC could start enforcement action to get the money from you.

If they believe you genuinely cannot pay now but will be able to make payments in the future, HMRC may offer you extra time to pay or a payment plan via Direct Debit.

Bear in mind, however, that you’ll have to pay interest on the amount you pay late, so this option may cost more in the long run.

Also, if you fail to keep up with these payments, HMRC could cancel the arrangement and take legal action against you.

If HMRC don’t think you can get your payments on track with more time, they won’t make an arrangement. Instead, you will be expected to pay straight away. Again, failure to do so could result in enforcement action.

2. Raise finance to boost your cash flow

If your business is struggling to pay VAT, securing external funding could help to generate the cash that’s required to pay.

There are numerous funding options available that could help in situations such as these, from a short-term loan to ongoing facilities that specialise in improving cash flow.

Click here to discover which funding solutions are ideal for helping businesses to pay VAT.

To find the ideal solution for your business, it’s important to first pinpoint the issues that caused you to be in this situation.

Whether the missed payment was a result of a customer not paying on time, a large business expense, or your cash flow is under constant pressure, this information could be the key to unlocking a finance facility that ticks all the right boxes.

More than providing the funding to pay off what you owe, a funding facility that supports your business going forward could bring even greater value to your business and prevent you from getting in the same situation again.

3. Improve your cash flow forecasting

Whilst improving your cash flow forecasting might not be an immediate solution to your VAT arrears problem, it could help you get back on track and prevent you from getting into this situation again.

Cash flow forecasting is an excellent money management tool which can help businesses to monitor their cash flow effectively and put plans in place to cover unexpected cash flow gaps.

However, many businesses struggle with this important task – particularly its accuracy – which can mean they’re left with a shortage of working capital when they need it most.

This comprehensive guide to cash flow forecasting looks at the importance of this task and how to do it successfully.


If your business is struggling to pay VAT we could help.

As an independent finance broker with over 20 years’ experience, we will use our expertise to help you secure the most suitable funding facility and lender to get your cash flow back on track.

Contact our team on 0800 9774833 or request a call back to discuss your requirements with one of our expert funding consultants.
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