Why company directors should seek advice before HMRC tax problems become a personal risk

Company directors struggling with VAT, PAYE or other tax liabilities have been given another reason to take HMRC arrears seriously following the Autumn Budget on 28 October 2026.

The government has confirmed plans to strengthen the consequences of breaching HMRC security requirements. Under the proposals, courts could be given the power to disqualify individuals for up to five years following certain criminal convictions relating to HMRC security legislation.

For directors already facing cash flow difficulties, this is an important development.

An HMRC security notice can already place considerable financial pressure on a business. The prospect of director disqualification introduces another potential consequence where individuals commit qualifying offences.

However, the most important message is not simply about what could happen when things go wrong. It is about taking action early enough to prevent matters reaching that stage.

What has changed in the 2026 Budget?

As part of the Autumn Budget, the government confirmed that it intends to introduce legislation through Finance Bill 2026–27 to amend the Company Directors Disqualification Act 1986.

The proposal, originally announced in Budget 2025, would allow a court to consider disqualifying an individual who has been convicted of a qualifying criminal offence under HMRC securities legislation.

The maximum period of disqualification under the proposed measure would be five years.

Under the existing framework, certain breaches of HMRC security requirements can result in criminal prosecution. However, a summary conviction for those offences does not currently provide the sentencing court with the same route to consider director disqualification.

The proposed legislation would address that gap.

Importantly, disqualification would not be automatic. A qualifying criminal conviction would be required, and the court would retain discretion to decide whether disqualification was appropriate.

The proposed power could apply not only to formally appointed directors but also to shadow directors and certain other individuals involved in company management, where the relevant legal conditions are met.

A conviction against a company alone would not automatically result in an individual’s disqualification under the proposed measure.

Simply having HMRC arrears, experiencing financial difficulties or receiving a security notice would not, in itself, trigger disqualification under the new provisions.

When would the changes take effect?

The Budget 2026 overview identifies 1 April 2027 as the intended date from which qualifying tax security offences would fall within the new measure.

However, HMRC’s accompanying technical note describes commencement as taking effect on Royal Assent of Finance Bill 2026–27.

The precise commencement arrangements will therefore need to be confirmed when the legislation is finalised.

Directors should be aware of the proposed changes, but should not assume that the new disqualification power is already in force.

Official government guidance: Company directors’ disqualification following breach of HMRC securities legislation

What is an HMRC security notice?

An HMRC security notice, formally known as a Notice of Requirement to Give Security, requires financial security against certain future tax liabilities.

HMRC can issue these notices where it considers there is a risk that future tax liabilities will not be paid.

They are commonly associated with VAT, PAYE and National Insurance contributions, although security requirements can also arise under other tax regimes.

HMRC may consider requiring security where there has been:

  • A history of unpaid tax liabilities.
  • Repeated late payments or previous compliance problems.
  • Concerns about the likelihood of future tax payments being made.
  • Previous involvement by relevant individuals in businesses that failed to meet their tax obligations.

The security requested can be substantial, potentially representing several months of expected tax liabilities.

For a company already struggling with cash flow, finding additional funds to provide that security can be extremely difficult.

Depending on the relevant tax regime and the circumstances, failing to provide security or continuing specified activities without complying with the requirement can constitute a criminal offence.

The proposed legislation would introduce the additional possibility of director disqualification following a qualifying conviction.

However, the rules, criminal offences and potential consequences differ between tax regimes. Not every failure to comply with a security notice will necessarily result in prosecution or fall within the proposed disqualification provisions.

For more information, read our guide What Happens If You Ignore an HMRC Security Notice?

The biggest mistake is waiting until HMRC issues a security notice

In our experience, tax problems rarely develop overnight.

A company may initially miss a VAT payment because a major customer has paid late. PAYE may then become difficult to meet, or an existing repayment arrangement may become unaffordable.

Directors often believe that the next large invoice, improved trading conditions or an anticipated contract will provide the money needed to catch up.

Sometimes that happens.

However, when arrears continue to increase without a credible repayment plan, the business can find itself facing more serious HMRC action.

By the time a security notice arrives, the company may already be dealing with substantial tax debts, pressure from other creditors and limited working capital.

The additional requirement to provide security can make an already difficult situation significantly worse.

This is why directors should not wait for formal HMRC enforcement action before seeking professional advice.

A company experiencing temporary cash flow pressure may still have options that become more difficult to pursue as the situation deteriorates.

Early engagement can make a significant difference

Directors who recognise financial problems early are generally better placed to assess their options and make informed decisions.

For example, a company that cannot afford its next VAT payment may still have a viable underlying business.

With early professional advice, it may be possible to examine the company’s cash flow, establish whether the shortfall is temporary and consider an approach to HMRC.

An HMRC Time to Pay arrangement may be appropriate where the company can demonstrate a realistic and affordable repayment plan, subject to HMRC approval.

However, agreeing a Time to Pay arrangement does not automatically cancel or suspend an existing security requirement. Any security notice must be addressed separately, in accordance with the applicable rules and deadlines.

Where financial difficulties extend beyond tax arrears, other restructuring options may need to be considered.

These could include a Company Voluntaryrrangement (CVA), which can enable a viable company to address historic debts through a formal arrangement with its creditors, subject to the relevant approval requirements.

Not every business can be rescued. If a company is no longer viable, taking advice early can also help directors consider an orderly closure, potentially through a Creditors’ Voluntary Liquidation (CVL).

The appropriate option will depend on the company’s financial position, its prospects of recovery and the interests of creditors.

The important point is that directors make these decisions while they still have the opportunity to consider the available alternatives.

Waiting until HMRC has issued a substantial security demand or commenced criminal proceedings can leave much less room for manoeuvre.

What if your company has already received an HMRC security notice?

If HMRC has issued a Notice of Requirement to Give Security, it is essential to act promptly.

The notice should identify the amount of security required, the relevant tax, the deadline for compliance and the available rights of review or appeal.

Directors should not ignore the notice or assume that simply continuing to trade will be acceptable.

Depending on the circumstances, there may be grounds to challenge the security requirement, discuss the company’s position with HMRC or consider other options.

It is particularly important to establish whether the notice restricts the company’s ability to continue specified activities without providing the required security.

The rules and potential criminal consequences differ between tax regimes, so directors should understand the precise requirements applying to their business.

Professional advice can help directors establish:

  • Whether the security requirement can be challenged through the applicable review or appeal procedures.
  • Whether providing the security is financially realistic.
  • Whether discussions with HMRC may assist.
  • Whether the business remains viable.
  • Whether continuing to trade is appropriate in the circumstances.
  • Whether restructuring or an orderly closure should be considered.

Where a notice has already been issued, directors should pay particular attention to the deadlines and any potential criminal consequences. Seeking advice does not, by itself, suspend those obligations.

Further guidance is available in our article: What should I do if I receive an HMRC security notice?

Why Business Rescue Expert believes early advice matters more than ever

The proposed director disqualification powers highlight how seriously HMRC security requirements must be treated.

But directors should not see the announcement as a reason to panic.

Financial difficulty does not automatically mean misconduct. A business can face genuine cash flow challenges despite the efforts of its directors to keep it operating.

What matters is how those difficulties are addressed.

At Business Rescue Expert, our priority is to help directors understand their company’s financial position and identify the most appropriate options.

That might involve assessing whether the business can be rescued, considering a realistic approach to HMRC or exploring formal restructuring.

Where recovery is no longer realistic, we can help directors understand their responsibilities and the available options for bringing the company’s affairs to an orderly conclusion.

Seeking advice does not mean committing to liquidation. In many cases, the first step is simply establishing whether the company has a viable future.

The earlier that conversation takes place, the more opportunity there may be to address problems before they escalate.

Don’t wait for HMRC to make the next move

The 2026 Budget proposals are a reminder that HMRC tax problems can have consequences beyond a company’s immediate financial position.

For directors, the possibility of disqualification following qualifying criminal offences involving security requirements makes early engagement particularly important.

If your company is falling behind with VAT or PAYE, struggling to maintain an HMRC repayment arrangement or concerned about meeting its next tax payment, now is the time to seek advice — not when a security notice has already arrived.

And if you have already received a Notice of Requirement, acting quickly is essential.

Business Rescue Expert can help you assess the company’s position, understand your options and consider practical steps towards a resolution.

Speak to Business Rescue Expert before an HMRC problem becomes a personal crisis.

Call 0333 939 80 40 or contact our team online to discuss your situation.

Early advice could make a significant difference to the future of your business and the decisions available to you as a director.