PAYE and CIS arrears: how UK lenders treat HMRC payroll debt
By Oliver Mackman · Reviewed 2026-04-26
PAYE / NIC payments to HMRC are behind. Or CIS deductions have not been remitted. The arrears have accumulated and HMRC has issued a demand.
What this is
PAYE (income tax + NIC withheld from employee wages) and CIS (Construction Industry Scheme tax withheld from subcontractor payments) are held in trust for HMRC. Arrears accumulate quickly because the obligation is monthly, the amount is the gap between employer payment and HMRC remittance, and interest accrues from day one.
What happens if you do nothing
HMRC enforcement on PAYE / CIS is typically faster than VAT. Compliance officers take a personal stance, directors can be required to attend interviews. In severe cases, a security deposit can be demanded. Personal liability for directors extends in cases of fraudulent or negligent failure.
Options, in order
- TTP arrangement, HMRC accepts TTP on PAYE / CIS arrears subject to filing all RTI submissions on time.
- Working-capital term loan to clear the arrears in full if cashflow recovery is uncertain.
- CIS subcontractor finance, specialist lenders advance against verified CIS deductions due back via tax return.
- Refinance against any unencumbered asset.
Which UK lenders engage
- · iwoca and similar working-capital lenders.
- · Specialist construction-finance lenders for CIS-specific cases.
- · Asset-backed lenders if commercial property or plant is owned.
HMRC-specific notes
RTI (Real Time Information) submissions must continue even when payments are behind. Late RTI filing is a separate, escalating offence. Director-loan account treatment of director-extracted funds when PAYE is overdue can create personal liability.
Do not do this
- · Continue paying directors' salaries when employee PAYE / NIC is unremitted.
- · Treat CIS deductions held back as cash on the company balance sheet. They are owed to HMRC at the next CIS return.
- · Submit RTI showing one figure but pay another. This is a fraud risk.
When to call an advisor before borrowing
Always when PAYE / CIS arrears exist alongside other tax debts. The compliance picture is the underwriting question, not just the cashflow.
Related
- · All HMRC pressure scenarios
- · Our post-decline routing (if mainstream lenders have declined)
- · After a decline: alternative lenders
Editorial only. We are not an FCA-authorised adviser or licensed insolvency practitioner. For active enforcement action, contact a licensed insolvency practitioner directly.