Case studies
Case study: Securing breathing space for a manufacturer facing HMRC pressure
Background
A manufacturing business had been navigating an increasingly difficult trading environment in the domestic market. During COVID, the company had taken on a fixed price contract to maintain workflow, but underestimated the costs involved. As conditions changed post-pandemic, that contract resulted in substantial losses. Delayed project completions due to factors outside the business’s control compounded the problem, as did slow-paying debtors who left the company regularly short of working capital. To bridge the gap, the business had become increasingly reliant on its bank overdraft facility, which had risen from £150,000 to £500,000 over the period. Rising costs across National Insurance, materials and labour placed further pressure on an already strained cash flow.
Challenges
With these pressures accumulating, the business had fallen behind on its HMRC obligations and accrued a debt of almost £900k. The directors had attempted to negotiate a Time to Pay arrangement directly with HMRC but were told by an officer that only five months would be offered. That timescale was unworkable. With 67 jobs at risk and no viable path forward through their own negotiations, the business needed expert support.
Solution
The client was introduced by their accountant to Restructuring and Insolvency Director, Phil Morton, who engaged the Business Advisory team. Following an initial meeting with the client, the team made early contact with HMRC to communicate the business’s position and request a pause on any enforcement action while a structured proposal was developed. Managing the relationship with HMRC at this stage was an important step in keeping the situation stable and creating the space needed to build a credible case.
A thorough assessment of affordability was carried out, looking carefully at the ongoing liabilities of the business, projected cash flow and its ability to meet future HMRC commitments as they fell due, alongside repaying the existing debt. The aim was not simply to agree a figure but to construct a plan that was genuinely sustainable for the business and highly credible to satisfy HMRC.
A formal Time to Pay arrangement was agreed for the full liability of £890k and structured over 18 months, more than three times the duration the directors had been told was possible when they approached HMRC themselves.
Outcome
The arrangement provided the stability needed to continue trading, protect jobs and focus on recovery. It is a strong result for a debt of this size and a clear example of what early, well-prepared engagement with HMRC can achieve.
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