Overdue payments of Corporation Tax, VAT and PAYE to HMRC hit £27.1bn in Q3 2025, a 138% increase on Pre-Pandemic times, but a fall of 19% from a peak of £51.3bn in Q3 2020, according to data obtained from HMRC by BTG.
The financial and real estate advisory group obtained the data, which also finds £3.8bn of this debt sitting in 172,402 Time To Pay agreements, following a Freedom of Information Act (FOIA) request to HMRC. The FOIA revealed overdue payments increased since Q1 2020 in VAT by 216%, corporation tax by 145% and PAYE by 72%.
BTG, which was recently rebranded from Begbies Traynor Group, also found these overdue payments were currently spread across 2.26million accounts, which is the second highest number in data, suggesting there are increasingly more debtors to HMRC. The revenue notes that the same debtors could be overdue in VAT, Corporation Tax and PAYE.
Julie Palmer, Partner and Restructuring expert at BTG, said:
“Covid lockdowns put a halt on activity for many businesses and as HMRC granted VAT holidays the amount owed increased rapidly. Businesses soon approached the time when they had to start paying back, which many did. However, the figure has not reduced as much as hoped as inflation and interest rates increased and consumer confidence dragged.
“This climate has resulted in debts of corporation tax, VAT and PAYE increasing rapidly, with the figures having risen to around £27bn from before the pandemic. It is not so much that the debt is high, it is that HMRC is taking action and demonstrating greater proactivity in recalling debt. This has been well documented and it is highly likely we will see a lot of these companies that are saddled with debt falling over. Carrying too much debt and not earning enough to repay that debt are symptoms of a ‘zombie’ company, which is unsustainable. There is a good chance that this combination of factors will see ‘zombie’ businesses fall over, but this activity can allow stronger businesses to take the market share that those businesses leave enabling them to grow.
“At the other end of the spectrum businesses that are succeeding are noting there are many opportunities for acquisition of strong, historic brands and stronger ideas. In some ways, if ‘zombie’ companies are acquired by better performing and funded ones then there is greater opportunity for improvements in productivity and job creation.”
For more information, visit www.btguk.com
UK VAT-registered businesses could defer VAT payments due between 20 March 2020 and 30 June 2020 either to 31 March 2021, or, if they applied for HMRC’s ‘New Payment Scheme’, they could spread their payments across financial year 2021-22. The impact of this can be seen in the increase in the VAT debt balance in 2020-21.