I Can’t Pay HMRC or My Bounce Back Loan
I Cannot Pay HMRC or My Bounce Back Loan: What Are My Options?
If your business is struggling to meet Bounce Back Loan repayments, falling behind on VAT or PAYE, or dealing with both at the same time, you are far from alone. These are the two most common debt pressures facing UK directors in the post-pandemic period – and they are manageable, provided they are addressed before the bank or HMRC takes the decision out of your hands.
The options available to you depend on whether the business is fundamentally viable or whether it has reached the point where closure is the more responsible path. Both situations have structured solutions. This page sets out what those solutions are.
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If You Cannot Pay Your Bounce Back Loan
Bounce Back Loans are formal legal obligations – but your lender is required to offer you flexibility before enforcement becomes an option. If you are struggling with repayments, the first step is to request access to the Pay As You Grow scheme from your lending bank.
Pay As You Grow allows you to extend the loan term from six to ten years, reducing monthly repayments without changing the total amount owed. It also allows you to take up to three periods of interest-only repayment – each lasting six months – and one full repayment holiday of six months during which no payments are required at all. These options can be used in combination and can provide significant breathing space for a business that is viable but cashflow-constrained.
If Pay As You Grow is not sufficient – or if the business is insolvent and cannot continue – a formal insolvency procedure is likely the appropriate next step. A Creditors’ Voluntary Liquidation can close the company properly, with the BBL treated as an unsecured creditor alongside other lenders. A Company Voluntary Arrangement can include the BBL as part of a broader restructured repayment plan if the business has a realistic path to recovery.
If You Cannot Pay HMRC
HMRC is frequently the most persistent and best-resourced creditor a director faces. Its enforcement powers are significant and it moves quickly when payments are missed without communication.
If you have outstanding VAT, PAYE, or Corporation Tax arrears, a Time to Pay arrangement – negotiated directly with HMRC or with our assistance – can allow you to repay those arrears in instalments, typically over six to twelve months. HMRC is considerably more receptive to a Time to Pay proposal when it is made proactively, before a deadline is missed, and when it is accompanied by a credible plan demonstrating how future obligations will be met alongside the arrears.
Where HMRC arrears have reached a level that makes a Time to Pay arrangement unworkable – or where enforcement has already begun – formal procedures such as a CVA or Administration can halt individual enforcement action from the point of appointment and provide a structured framework for addressing the debt.
Not sure which of these applies to your situation? Our first conversation will establish that quickly and honestly.
Book a free, confidential call with Mike
A Critical Warning: Do Not Simply Strike Off the Company
If your company has no trading assets remaining but still owes a Bounce Back Loan, it may be tempting to apply to strike it off at Companies House and walk away. This approach carries serious risk.
Lenders holding outstanding BBLs are actively encouraged to object to voluntary strike-off applications – and many do so routinely. If the bank objects, the dissolution is halted and the company remains on the register with the debt outstanding.
More importantly, the Insolvency Service has explicit powers to investigate the conduct of directors of dissolved companies. A dissolution does not end your exposure as a director – it simply removes the formal oversight that a proper liquidation would provide. If the BBL funds were not used for the economic benefit of the business, or if the dissolution is subsequently challenged, you may face personal investigation without the protections that a properly conducted CVL would have afforded.
The right route for a company with outstanding BBL debt and no assets is a formal liquidation. In some cases, directors choose to fund a CVL personally – at a cost typically starting from £3,000-£5,000 – specifically to close the company properly and protect their own position.
Expert Advice, Delivered Personally
The Insolvency Practitioners is an independent national firm led by Michael Chamberlain. Mike has spent over 30 years helping directors navigate complex debt positions, including the specific challenges of post-pandemic government-backed lending and HMRC arrears.
Every director who contacts us speaks to Mike directly – not a junior, not a call handler. That is not something every firm can say.
“The most dangerous thing you can do with a Bounce Back Loan or HMRC debt is to ignore it. The banks and the Revenue have sophisticated systems for flagging defaults. By stepping forward and proposing a plan – or an orderly closure – you retain the professional high ground.”
A Recent Example
A director of a hospitality business came to us in 2023 carrying £65,000 in Bounce Back Loan debt and £48,000 in HMRC VAT arrears. The business had not recovered its pre-pandemic trading levels and the combined debt had made it unviable. He had been considering simply applying to strike the company off – his accountant had told him the loan was unsecured and he assumed that meant it would simply disappear.
It would not. We explained the dissolution risk clearly and recommended a CVL. The company was liquidated properly, the BBL and HMRC debt were treated as unsecured creditors in the correct statutory order, and the liquidator’s review of the BBL usage confirmed it had been used appropriately for business costs during the pandemic. No adverse findings were made against the director.
The strike-off route, had he taken it, would have left him exposed to ongoing investigation without those protections.
What Route Is Right for You?
If your business is viable but needs time – Explore a Time to Pay arrangement or CVA
If your business cannot continue and needs to close properly – Explore a Creditors’ Voluntary Liquidation
If you are not yet sure which applies – Speak to Mike Chamberlain and we will establish it together
Frequently Asked Questions
Am I personally liable for a Bounce Back Loan? BBLs were issued without personal guarantees, which means that in a properly conducted liquidation, you are generally not personally liable for the debt. However, there are exceptions: if the loan was misused – taken out with inflated turnover figures, or used for personal expenditure rather than business costs – a liquidator can hold you personally responsible for the amount misapplied. The liquidator has a statutory duty to review how BBL funds were spent in any CVL.
Can I use a Time to Pay arrangement for a Bounce Back Loan? No. Time to Pay is a mechanism specific to HMRC tax debts. For a Bounce Back Loan, the equivalent flexibility is provided through the Pay As You Grow scheme, which must be requested from your lending bank directly. We can help you understand which options are still available to you.
What happens if I miss an HMRC payment? If you miss a payment or a Time to Pay deadline without communicating with HMRC, enforcement can follow quickly. This may include distraint on company assets, a statutory demand, or – in more serious cases – a winding-up petition. The earlier you communicate with HMRC about a problem, the more options remain available.
Can I include a Bounce Back Loan in a CVA? Yes. A CVA can include all unsecured creditors, including the bank holding the BBL and HMRC. Provided the CVA proposal is realistic and creditors representing 75% by value of those who vote approve it, the arrangement is binding on all unsecured creditors, including any who voted against.
Will I be investigated for how I used my Bounce Back Loan? In a formal CVL, the liquidator has a statutory duty to review how the BBL funds were spent. Provided the money was used for the economic benefit of the business – covering wages, overheads, supplies, or other legitimate costs – there is nothing to fear from this review. Where funds were misapplied, the liquidator has a duty to recover them.
What if my company has no assets to pay for a liquidation? If the company has no assets, the liquidator’s fees cannot be funded from realisations in the usual way. In these cases, directors sometimes choose to fund the CVL personally – typically from £3,000-£5,000 – to ensure the company is closed properly and they retain the protections that a formal process provides. The alternative – leaving the company with outstanding BBL debt and attempting a strike-off – carries significantly greater personal risk.
What if HMRC has already issued a winding-up petition? A winding-up petition changes the urgency of the situation significantly. Once a petition is advertised in The Gazette, bank accounts are typically frozen. However, depending on timing, a voluntary route – a CVL or administration – may still be available. You must seek specialist advice immediately. Find out more about what to do if you have received a winding-up petition.
