How To Close A Company Wih HMRC debts
Attempting strike‑off with HMRC arrears almost always fails. HMRC routinely objects, viewing the move as deliberate tax avoidance, and may escalate matters by filing a winding‑up petition. This forces the company into compulsory liquidation, triggers a formal investigation
by Jon Rudd An experienced operations manager and insolvency expert who excels at streamlining processes and putting the customer first at all times.
Can You Dissolve a Company with HMRC Arrears?
Voluntary dissolution through the strike‑off process is a common way to close a company, but it is not suitable if debts remain.
Attempting to strike‑off with HMRC arrears almost always fails. HMRC routinely objects, viewing the move as deliberate tax avoidance, and may escalate matters by filing a winding‑up petition. This forces the company into compulsory liquidation, triggers a formal investigation, and can leave directors personally liable for unpaid debts.
The Safer Option: Creditors’ Voluntary Liquidation (CVL)
The correct route for closing a company with HMRC debts is Creditors’ Voluntary Liquidation (CVL). This statutory procedure protects creditors from further loss and shields directors from allegations of misconduct.
When a business becomes insolvent, directors must legally prioritise creditors’ interests. Ignoring this duty risks disqualification and personal liability. CVL ensures compliance and provides a structured, lawful way to close a company.
How CVL Works with Tax Debts
- The insolvency practitioner sells company assets and distributes funds according to UK insolvency law.
- Remaining debts, including HMRC arrears, are written off once assets are realised.
- A licensed insolvency practitioner manages the process, investigates company conduct, and reports to the Insolvency Service.
- As long as no misconduct is found, directors face little risk of personal liability or disqualification.
Before starting a CVL
Consider a Time to Pay arrangement:
You could first contact HMRC’s Business Payment Support Service to see if a Time to Pay (TTP) arrangement is possible, allowing you to pay the debt in instalments.
Be honest with creditors:
Being open with creditors about the company’s financial situation can lead to better communication and potential solutions
Funding a CVL with HMRC Debts
Liquidation costs and professional fees are taken from company assets before any creditor payments. Directors’ may qualify for redundancy pay to cover costs.
Why Professional Advice Matters
HMRC is often the largest creditor in insolvency cases and acts quickly to recover tax arrears. They can petition for compulsory liquidation and are classed as secondary preferential creditors for PAYE, VAT, and other taxes collected on their behalf.
Seeking advice from a licensed insolvency practitioner is essential. Professional guidance ensures directors close their company safely, comply with UK law, and avoid unnecessary personal risk.
Expert Help with HMRC Debts
We specialise in helping directors manage HMRC arrears and shut down businesses lawfully. Our team offers free, same‑day consultations to guide you through CVL and protect your position.
Key Takeaways
- Strike‑off fails with HMRC arrears:
HMRC routinely blocks voluntary dissolution attempts when tax debts remain, often escalating to compulsory liquidation. - CVL is the lawful route:
Creditors’ Voluntary Liquidation protects creditors, ensures compliance, and shields directors from misconduct allegations. - Debts are written off in CVL:
Once assets are sold and distributed, remaining HMRC arrears are legally cleared unless misconduct is found. - Alternative options exist:
Before liquidation, directors can explore a Time to Pay arrangement with HMRC or negotiate openly with creditors. - Professional advice is critical:
Insolvency practitioners guide the process, manage risks, and help directors avoid personal liability or disqualification.
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