By: Money Navigator Research Team
Last Reviewed: 13/01/2026
FACT CHECKED
Quick Summary
A business may still be able to take card payments during an HMRC freeze, but “taking payments” and “getting usable money” are not the same thing.
Card transactions can sometimes authorise at the terminal or online checkout while payouts are delayed, held, or become inaccessible because the receiving bank account is restricted (or because the payment provider places the merchant account under review).
Whether card payments continue depends on the type of HMRC action, the scope of the restriction, and how your acquirer/processor responds.
This article is educational and not financial advice.
What people mean by an “HMRC freeze”
“HMRC freeze” gets used to describe a few different situations, and the distinction matters:
A court order freezing funds (often called an Account Freezing Order), which restricts what can be paid out from the account. The legal basis sits within the Proceeds of Crime Act framework (see the legislation on an application for an account freezing order and related provisions in the Criminal Finances Act 2017).
Tax debt recovery mechanisms that can affect cash in bank accounts (for example Direct Recovery of Debts, described in HMRC’s issue briefing on Direct Recovery of Debts).
A bank-led compliance freeze where HMRC is part of the background context (for example, queries about tax, source of funds, or a creditor position) rather than the direct “freezing” instrument.
If you want the wider map of mechanisms and terminology, see our guides on HMRC freeze business bank account and HMRC enforcement vs bank compliance freezes.
Why card payments can look “fine” while cashflow breaks
Card payments have multiple steps:
Authorisation (the customer’s bank approves the transaction)
Settlement (the transaction is processed through the card network and acquirer/processor)
Payout (funds are transferred to the business’s nominated bank account)
An HMRC-related restriction often impacts payout and access to funds more directly than authorisation. Payment providers can also impose their own restrictions if they see elevated risk, meaning authorisation may continue for a time while payouts are paused (or both may stop).
For the broader (non-HMRC-specific) card-payment mechanics during a freeze, see what happens to card payments when a business account is frozen and the settlement-specific explainer card settlement payouts when a business account is frozen.
What happens in practice: three common patterns
A business may continue to see “approved” transactions at the terminal or checkout, but payouts don’t arrive or arrive and remain unusable. This is where businesses often report “sales are happening, but money is stuck”.
Payment providers may pause payouts during account restrictions and investigations. That general “blocked payments/frozen accounts” context is discussed by the Financial Ombudsman Service in its guidance on frozen accounts and blocked payments, and the FCA has published discussion of account access and restrictions in its report UK Payment Accounts: access and closures (PDF).
Pattern 2: The processor holds funds (or increases reserves) even before payout reaches the bank
Sometimes the restriction shows up first inside the payment stack: the processor holds balance, delays payout schedules, or increases reserves. The drivers and typical knock-on effects are covered in:
why payment processors hold payouts during account restrictions
can a bank freeze trigger higher processor reserves and payout delays?
provider examples in Stripe and PayPal hold funds during a business account freeze
Pattern 3: Card acceptance is disabled (terminal/checkout stops taking payments)
In higher-friction scenarios, acceptance can be disabled by the terminal provider, gateway, or acquirer. The “will it still take payments?” question differs for in-person versus online routes:
Summary table
| Scenario | Outcome | Practical impact |
|---|---|---|
| HMRC-linked restriction affects the bank account (outgoing access limited) | Card payments may still authorise; payout access is constrained | Sales can continue while cash availability tightens |
| Account Freezing Order limits withdrawals/payments | Funds may settle but remain inaccessible under the order | Payroll, suppliers, and refunds can become harder to process |
| Processor pauses payouts during review | Funds accumulate in the processor balance | Reconciliation workload increases; cashflow forecasting becomes less reliable |
| Reserves increase to manage refund/chargeback exposure | A portion of takings is held back | Lower net cash received; longer cash conversion cycle |
| Refund capability is restricted | Refunds slow or fail | Complaint volume rises; disputes/chargebacks become more likely |
| Acceptance is disabled by the provider | Transactions decline at checkout | Immediate revenue interruption; customer experience deteriorates |
Refunds and disputes become the pressure point during HMRC freezes
Even when payments are still being taken, refund handling often determines whether customer outcomes stay stable or escalate into disputes. If refunds cannot be processed promptly (because payouts are held or outgoing payments are restricted), the likelihood of disputes increases.
Refund mechanics during HMRC-related restrictions are covered in can you issue refunds during an HMRC freeze?. Dispute pathways and consequences during restrictions are covered in chargebacks when a business account is frozen.
For scheme context, UK Finance explains how disputes work in practice in its guide to chargeback and Section 75. The underlying “payment services” framework sits within the Payment Services Regulations 2017, which sets out key concepts around execution, authorisation, and related responsibilities.
Scenario Table
| Scenario-level | Process-level | Outcome-level |
|---|---|---|
| HMRC-related restriction is applied | Bank restricts account operation under legal/compliance constraints | Outgoing access reduced; funds may be inaccessible |
| Merchant risk profile increases | Processor adjusts payout schedules and reserves | Payout delays; rolling reserve expands |
| Refund demand rises | Refunds depend on permissions and available balances | Refund backlogs; customer escalation |
| Disputes increase | Chargeback processes apply through issuers/schemes | Funds reversed; fees and liability exposure rise |
| Restriction ends vs escalates | Controls lift or the relationship changes | Settlement normalises, or payment rails need re-establishing elsewhere |
Can opening a new account “solve” card payments during an HMRC freeze?
A new bank account can change where future payouts are directed only if the processor supports changing payout details and completes its own checks. However, an HMRC-driven restriction can also constrain what happens to funds more broadly, depending on the legal mechanism and scope.
This is why the “can a new account be opened?” question is separate from “will payouts be usable?”. For the opening-account side, see can you open a new business bank account if one is frozen?. For duration expectations (which affect operational planning), see how long can HMRC restrict a business bank account?.
Compare Business Bank Accounts
Businesses often compare providers when payment rails are disrupted, but account features and onboarding processes differ across the market. A neutral starting point for provider categories, typical features and key considerations is our hub on business bank accounts.
Frequently Asked Questions
Sometimes. Card authorisation can continue even when a bank account is restricted, because authorisation is a separate step from payout and access to funds.
However, the practical question is usually whether funds become available for business use. HMRC-related restrictions can limit outgoing payments or access to balances, and processors can also pause payouts or increase reserves during reviews.
They may continue to process transactions if the merchant account remains active and authorisations are permitted. A freeze on the bank account does not automatically switch off terminal authorisations.
But terminals can stop taking payments if a terminal provider, acquirer, or gateway restricts the merchant account. That “provider-level” switch-off is different from a bank-account restriction and can happen quickly in higher-risk scenarios.
Online card payments have the same separation between checkout authorisation and payout, but online setups often involve more moving parts (gateway, processor, fraud tools). That can create more points where restrictions can be applied.
Businesses can see online payments still being captured while payouts are held, or see online acceptance disabled if the payment provider pauses the merchant account. The day-to-day symptom depends on which layer is restricted.
Funds usually flow through the acquirer/processor settlement process and then to the nominated payout bank account. If that payout account is restricted, funds may not land as expected or may land but remain inaccessible.
In other cases, funds are held within the processor balance while reviews or restrictions are in place, meaning the money exists in reporting but is not released to the business as cash.
HMRC has mechanisms that can require banks/building societies to pay HMRC from accounts in certain circumstances, such as Direct Recovery of Debts, described in HMRC’s published briefing. That is about recovering amounts from accounts rather than the card network itself.
Separately, where a court order freezes funds (for example under the Proceeds of Crime framework), it can restrict withdrawals or payments from the account. Those restrictions can affect access to card takings once they settle into the account.
Refunds often become constrained when payouts are held or outgoing payments are blocked. Even if the business intends to refund, the payment stack may require sufficient available balance and permissions to complete the refund.
Delayed refunds can create customer harm and increase the risk of disputes. That’s why refunds are often the “stress test” that turns an operational restriction into a reputational issue.
It can. When fulfilment is delayed or refunds are slow, customers may pursue chargebacks. Chargeback is a card-scheme process rather than a single statutory entitlement, and outcomes depend on evidence and the reason code.
If disputes rise, the commercial effects can include reversed funds, dispute administration overhead, and higher reserves – which can further tighten cash availability while restrictions are ongoing.
Some providers allow payout account changes, but they usually apply checks before changing where funds are sent. When a business is under restriction or review, providers may pause changes until verification is complete.
Even if a payout account is changed, an HMRC-driven restriction can still constrain the broader ability to access or move funds, depending on the legal scope of the action and any related controls.
Not always. Some restrictions are driven by legal or enforcement processes, while others are bank-led controls (for example anti-money laundering reviews) where HMRC may be context rather than the direct freezing mechanism.
The difference matters because it affects what can be communicated, what can be processed, and what kind of resolution pathways exist. That’s why separating “enforcement vs compliance” is often the first step in understanding what is and isn’t possible.
Duration depends on the mechanism: a temporary restriction while checks run can be short, while court-driven or enforcement-linked restrictions can run longer and may involve formal variation or escalation steps.
Operationally, the longer the restriction lasts, the more likely it is that second-order effects (refund backlogs, supplier issues, dispute rates, reserves) become the dominant problem rather than checkout acceptance.
The biggest misconception is treating “card payments” as a single switch. During an HMRC freeze, the checkout layer (authorisation) can sometimes continue while the cash layer (payout and usable funds) is constrained by legal restrictions or processor controls.
The hidden mechanism is that HMRC-linked action can change the risk environment for every connected party – bank, processor, and merchant. Once refunds and disputes start to rise, providers often respond by tightening payout rules and reserves, which can make the restriction feel wider than the original trigger.