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I Can’t Pay My VAT Bill, What Now?


When a business is unable to pay their VAT bill, it can be a stressful and challenging situation. However, there are steps that can be taken to address the issue and mitigate the potential consequences. We will discuss your options and potential outcomes in this article if you are unable to make your bill payment.


First and foremost, it is important to communicate with HM Revenue and Customs (HMRC), the government agency responsible for collecting VAT. Ignoring the problem or failing to communicate with HMRC will only make the situation worse. Businesses should contact HMRC as soon as they realise they will be unable to pay their VAT bill and explain the circumstances.

One option for businesses struggling to pay their VAT bill is to apply for a Time to Pay arrangement. This allows businesses to spread the cost of their VAT bill over a longer period of time, making payments more manageable. To apply for a Time to Pay arrangement, businesses will need to provide HMRC with detailed financial information, including their income and expenditure, as well as a clear plan for how they will pay off the VAT debt.

Another option is to apply for a VAT deferment. This allows businesses to postpone paying their VAT bill, but they will still be responsible for paying the full amount of VAT due. This option may be more suitable for businesses that are facing temporary financial difficulties and expect to be able to pay the VAT bill in the future.

If a business is unable to pay their VAT bill and does not qualify for a Time to Pay arrangement or VAT deferment, they may be eligible for a VAT reduction. This allows businesses to pay a reduced amount of VAT, based on their ability to pay. However, businesses should be aware that this option may result in penalties and interest charges.

Consequences Of Not Paying Your VAT Bill

If a business does not pay their VAT bill, they may face serious consequences. The business may be charged penalties and interest on the unpaid VAT, which can quickly add up and increase the amount owed. HM Revenue and Customs (HMRC) may also take legal action to recover the unpaid VAT, which could result in the business being taken to court and facing fines or even imprisonment. 

Additionally, the business may have their assets seized to pay the outstanding VAT debt, which could include bank accounts, vehicles, and equipment. Furthermore, the business credit rating may be affected, and it may become more difficult for them to obtain financing in the future. Ultimately, failure to pay VAT can lead to the closure of the business.

Things To Take Away

In summary, when a business is unable to pay their VAT bill, it is important to communicate with HMRC and explore options such as Time to Pay arrangement, VAT deferment, VAT reduction, and review of VAT registration status. Seeking professional advice from an accountant or tax advisor can help businesses understand the potential consequences of their decisions and assist in finding the best course of action. 

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