How HMRC Debt Can Turn a Business Into a Zombie Company

HMRC debt can quickly turn a struggling business into a “zombie company”, where it continues trading but is no longer financially recovering. Unpaid VAT, PAYE, Corporation Tax, and National Insurance can build up while the company uses limited cash to cover wages, suppliers, and daily costs. Over time, old tax arrears remain unpaid while new liabilities continue to arise, creating ongoing pressure. The business may still have customers and turnover, but little progress is made towards stability. Directors should monitor HMRC arrears carefully and seek advice early before enforcement action or insolvency becomes unavoidable.

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