HMRC and Creditors

If you are under pressure from your creditors, we can help you resolve the problem

HMRC & Creditors

We will work alongside you, and your existing advisers, to understand the issues and formulate a plan. 

We will work with you to gain the support of lenders, landlords, customers, suppliers and HMRC.

Dealing with Creditor Pressure

Whether it is demands for payment, threats of County Court Judgements or even a Winding Up Petition, creditor pressure can very quickly damage a business.  It is stressful when the formal paperwork arrives and takes you away from doing what you do best.

Creditors are those people that your business owes money to.  Usually that includes:

  • Trade creditors and suppliers
  • HMRC
  • Banks and other finance providers
  • Landlords

We work with you to decide how best to deal with creditor pressure and ensure the future survival of your business.

When a creditor starts to take legal action to recover their debt it is important that you act quickly.  Legal remedies work to tight timescales.  14 days can pass very quickly when you are struggling to manage your cashflow.  It is important that you take advice as soon as possible.

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Creditor pressure from suppliers

Creditor pressure usually has two causes:

  1. A dispute over the amount due
  2. An underlying cashflow problem

We can help you resolve both.  Whatever the cause the sooner you take advice the more options there will be to resolve the problem.

A difficulty paying suppliers can signal a very real threat to your business and your ability to continue trading.  Sometimes the problem is one that has been building for a while and sometimes it comes on suddenly, usually due to an unexpected reason, such as the loss of a major contract or a significant bad debt.  Whatever the cause, we can help if you are suffering from creditor pressure.

These range from arranging viable repayment plans through to defending and holding off more serious recovery action such as Bailiffs and Winding Up Proceedings.

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HM Revenue and Customs

HM Revenue and Customs (“HMRC”) can be very persistent in seeking to collect debts from businesses.  If you or your business is under threat of recovery action by HMRC or you are experiencing difficulty in paying you must address it quickly.   HMRC are more willing to work with business owners who approach them early and seek to formulate a plan.

If the debts to HMRC have built over a number of years it may be more difficult to reach an agreement with them. We can help you, or make use of an HMRC expert, to negotiate a time to pay agreement (TTP). A TTP can be challenging as there will be an expectation that you will stay up to date with current HMRC payments and make payments to the “old” liabilities.

If HMRC will not agree to a TTP they can quickly shift to taking steps to wind the business up. You need to be ready for this with a plan in place.


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Banks and other lenders

Problems can occur if you do not keep to the lending agreement or if a funder or finance provider perceives that your business is unable to repay its debt. It can be that they have become aware of other creditor recovery action.

If the lender understands that you are taking professional advice and steps to improve your situation they will often allow some breathing space.  We can negotiate with them for you.

Often when banks and other lenders have lent money to your business they will require you to give a “personal guarantee” i.e. they will have asked you to agree to them taking security over your home or other personal assets.  In considering the approach that should be taken to your lenders we will also consider your personal situation.  Once you have given a personal guarantee you are bound by it.  Should your business fail it could also lead to your personal insolvency.

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Landlords

If you are struggling to pay the rent when it is due to a landlord it can be a very serious threat to your business.  In addition to the ability to recover debts in the same way as other creditors, landlords have additional rights contained in lease or rental agreements and there are additional rights given to them by law. If there are arrears they can very soon take the decision to change the locks.

We can help you by negotiating with your landlord, with a focus on preserving the relationship, to allow a business to continue in order to deal with rent arrears.  Our team understands the importance of constructive discussions and can take the emotion and stress out of the situations for you.

We will assess the viability of your business alongside these negotiations. It may be that if your business is insolvent the lease can be “novated” to a new business to allow you to continue trading.

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Further information on HMRC & Creditors

  • A guard in yellow jacket at the entrance of HM Revenue & Customs building in the UK.

    HMRC Time to pay

  • HMRC Financial Distress Blog - DMC Recovery

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    Other Creditors

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Frequently Asked Questions

A debenture, broadly speaking, is a document stating the terms of a loan, usually to a company. Debentures may be secured on part or all of a company’s assets. Where a company’s principal secured creditor is a bank, a debenture in favour of the bank is likely to create what is legally know as a fixed and floating charges over all of the company’s assets.

A fixed charge is a form of security granted over specific assets, preventing the debtor from dealing with those assets without the consent of the secured creditor. Companies can create floating charges; individuals cannot.

A floating charge is a form of security granted to a creditor over general assets of a company which may change from time to time in the normal course of business (e.g. stock).

Companies or individuals give a preference if they do something to put a creditor in a better position on a bankruptcy or winding up. A liquidator or trustee in bankruptcy can apply for an order restoring the position to what it was before the preference took place. The preference must have taken place within a defined time limit prior to the start of the bankruptcy or liquidation and the liquidator will need to consider the “desire” to prefer. However, the desire is assumed when the person or business paid was connected to the company or director.

A Proof of debt is a document submitted by a creditor to the licensed insolvency practitioner or official receiver giving evidence of the amount of the debt. In an insolvent liquidation payments can only be made to creditors who have submitted a formal proof of debt. If a creditor only provides copy invoices or similar this will not be sufficient.

A secured creditor is a creditor who holds security (a charge) over the company’s assets (e.g. a bank, or other financial institution). This class of creditor is paid before ordinary creditors.

A statutory demand is a formal notice requiring payment of a debt exceeding £750 within 21 days. It is used as the first step in bankruptcy and compulsory winding up.

An unsecured creditor is any creditor who does not hold security. This class of creditor will rank last of all in cases where a dividend is likely to be paid. Suppliers usually fall into this category and so do employees for Redundancy and Notice Pay. However, for employees the Redundancy Payments Service will pay their Statutory Redundancy and Notice Pay so it will only be any shortfall that is included here.