What are the consequences of missing a tax payment as a company?

Missing a tax payment triggers increasingly serious consequences that can escalate rapidly from administrative penalties to company closure. Initially, HMRC imposes financial penalties and interest charges that compound the debt—late payment penalties for VAT and Corporation Tax typically start at small fixed amounts but increase substantially for repeated defaults, while interest accrues daily on outstanding amounts at rates that make the debt grow quickly. HMRC then begins enforcement action: they will contact you demanding payment, may impose payment plans with strict conditions, and can escalate to more aggressive collection methods. For PAYE and VAT arrears, HMRC has particularly strong enforcement powers because they view these as 'trust taxes'—money collected from employees or customers that should have been paid to the government. If you miss payments and don't engage with HMRC to arrange time-to-pay, they can issue statutory demands, which are formal demands for payment giving 21 days to pay or face winding-up petitions. HMRC is one of the most frequent petitioners for compulsory liquidation in the UK, and they will not hesitate to petition for winding-up if they believe a company is deliberately avoiding payment or has no prospect of paying. Once a winding-up petition is filed and advertised in the Gazette, your bank will typically freeze accounts immediately, making it impossible to trade and effectively forcing the company toward liquidation. Beyond company-level consequences, directors can face personal liability in certain circumstances: if HMRC believes directors have deliberately evaded tax or misused tax receipts, they can issue personal liability notices, particularly for unpaid PAYE and National Insurance. In serious cases involving fraud or dishonesty, HMRC can pursue criminal prosecution. Even without fraud, directors of companies that repeatedly fail to pay PAYE can be subject to personal liability notices making them personally responsible for the tax debt. Missing tax payments also damages relationships with HMRC that are hard to repair—once HMRC loses confidence in a company's ability or willingness to pay, they become far less cooperative about negotiating payment plans or showing flexibility in future. The reputational damage of HMRC enforcement can also be severe, as winding-up petitions are publicly advertised, alerting suppliers, customers, and competitors to your financial difficulties. However, not all missed tax payments lead to disaster—HMRC can be surprisingly pragmatic if you engage with them proactively. If you contact HMRC before you miss a payment explaining why you cannot pay and proposing a realistic repayment plan, they often agree to time-to-pay arrangements that allow spreading the debt over several months or even years. The key is early, honest communication combined with evidence that you're taking the situation seriously and have a viable plan for repayment. What HMRC will not tolerate is being ignored, discovering you've prioritized other payments over tax, or being presented with unrealistic repayment proposals that clearly won't work. If you've missed tax payments or know you're about to, your immediate priorities should be: contact HMRC proactively to explain the situation and propose solutions; prepare detailed cashflow forecasts showing how you can realistically repay over time; ensure you don't miss further current tax obligations while negotiating historical arrears; seek advice from an insolvency practitioner or tax adviser about whether formal insolvency procedures might be necessary; and document everything carefully because your handling of tax debts will be scrutinized if the company enters insolvency. Remember that HMRC has better information-gathering powers than most creditors and will know if you're paying other creditors while claiming inability to pay tax, which will destroy any goodwill and accelerate enforcement.