Receiving a demand letter from HMRC can be daunting for any company director. Chris Worden explains why these letters arrive, what they mean, and how to respond effectively to avoid escalation.
Summary
- HMRC demand letters signal serious compliance concerns.
- Triggers include unpaid VAT, late filings, and failed payment plans.
- Ignoring or panic-paying can worsen your situation.
- Assess your business viability before responding.
- Engage with HMRC honestly and promptly.
- Seek professional advice if unsure.
Why HMRC Sends Demand Letters
HMRC issues demand letters when they identify non-compliance, not just when you miss a payment. In 2026, enforcement is stricter and faster, with more letters and visits than ever before. Triggers include:
- Unpaid VAT or corporation tax
- Late submissions or missed filings
- Repeated penalties
- Failed time to pay arrangements
Types of HMRC Demand Letters
- General Payment Demands: Require immediate payment and warn of enforcement.
- Pre-enforcement Warnings: Mention debt collectors or control of goods.
- Statutory Demand Warnings: Rare but serious, often a precursor to insolvency action.
Common Mistakes Directors Make
- Panic paying and draining working capital
- Ignoring the letter or failing to engage
- Agreeing to unrealistic payment plans
- Trying to handle HMRC alone without advice
How to Respond to an HMRC Demand Letter
- Stay calm: Assess your liabilities and cash flow.
- Understand the letter: Identify which tax, period, and enforcement is referenced.
- Assess viability: Can your business realistically recover?
- Engage with HMRC: Be honest and propose realistic payment plans if viable.
- Consider professional help: If insolvency is likely, seek advice on controlled exit options.
Key Takeaways
- HMRC demand letters are a sign of advanced compliance concerns.
- Act quickly and honestly to avoid enforcement escalation.
- Don’t ignore or panic—seek advice if you’re unsure.
- Chris Worden and his team can help you understand your options.
Frequently Asked Questions
- What triggers an HMRC demand letter?
- Common triggers include unpaid taxes, late filings, repeated penalties, and failed payment arrangements.
- What should I do if I receive an HMRC demand letter?
- Stay calm, assess your financial position, understand the letter, and engage with HMRC promptly.
- Can ignoring an HMRC letter make things worse?
- Yes, ignoring the letter can lead to faster enforcement and potential insolvency action.
- Should I pay HMRC immediately if I get a demand letter?
- Don’t panic pay—ensure you have a plan and enough working capital before making payments.
- Where can I get help dealing with HMRC?
- Contact Chris Worden and his team for free, independent advice via our contact page.
