And what can you do if your business receives one?

HMRC will issue a seven day warning letter if they have been chasing a company to pay its debts. The HMRC letter, commonly resulting in a winding up petition, escalates the threat of compulsory liquidation and is in response to a creditor seeking to recoup money for debts they believe the business cannot pay.

A winding up petition is the very last resort a creditor will take in recovering debts owed, as it is a costly procedure for all involved, so a seven day warning letter for non payment is not to be ignored.

If your company does receive an HMRC seven day warning letter, your business faces the very real threat of being forced into compulsory liquidation. From the time you are issued with the HMRC letter for non payment, you will have seven days to respond and take positive action.

You must also note that once your company has been issued with the HMRC threat of winding up petition letter, the petition must be advertised in the London Gazette. This will be done so seven days after your business has been notified. This could cause further damage, leaving your company bank account frozen and pave the way for other creditors to support the HMRC winding up process.

What does the HMRC seven day warning letter contain?

The HMRC seven day warning letter is designed to prompt the company into paying their debts. To provoke a response from the company director, the letter contains a statement of liabilities. Detailed alongside the liabilities is the amount owed to the creditor. The letter will also state that if the payment is not made, or action taken within seven days of the letter being issued, the solicitor of HMRC will present a petition to the high court for the purpose of winding up the company.

The opening statement in full: “Unpaid debt £X including interest to date. The amount shown above detailed in the attached statement of liabilities remains unpaid. If you do not make payment, in full, within seven days of the date of this letter I will instruct the solicitor of HM Revenue & Customs to present a petition to wind up the company, without further warning, to the High Court, on the grounds that the company is unable to pay its debts.”

As mentioned above, the letter is issued in the hope of prompting the company to pay their debts in full. However, it could also be the case that you could discuss options for payment and that the creditor has issued the winding up letter to create a reaction due to continued non payment. The HMRC seven day warning letter is not to be ignored, and you must take action upon receiving the letter.

What does the HMRC winding up process mean?

We have outlined the compulsory liquidation process – from issue of a statutory demand from creditors to the winding up of a company – with thoughts to help your company, if you are concerned about signs of insolvency.

In terms of action that HMRC will take, there are a number of options at their disposal for businesses that cannot pay their debts, and do not respond to the seven day warning letter. More details of the options available to HMRC in pursuing outstanding balances can be found here.

What do I do if I can’t pay?

Should you receive the HMRC seven day warning letter, but not have the ability to pay the debts – you should still take action. You cannot simply ignore the HMRC letter. HMRC will take further action if you do not respond, and that could result in compulsory liquidation and the complete dissolution of your company.

The best time to consider the options available to you to deal with the issue is before the petition is issued. Possible solutions may include:

If you have received an HMRC seven day letter of non payment, you must seek advice as soon as possible to save your company. Our BusinessRescueExperts can discuss the letter and the outcomes for your business in confidentiality.