The Chancellor told the Cabinet the UK would not win any legal battle regarding Brexit bill cash.
Mr Hammond told the desperate Cabinet ministers at a meeting on Tuesday that Britain will only save between £3billion and £9billion if it leaves without a trade deal.
According to the Daily Telegraph, one Cabinet source said: “He said that the Treasury’s legal advice was that if we left without a deal we would still have to pay the EU £30-36 billion because we would be unlikely to win any case that went to international arbitration.”
Prime Minister Theresa May has told EU chiefs she will not give in and change her stance on the Irish border question, where negotiations have been at a deadlock for months.
Mrs May told her Cabinet on Tuesday that she believes she will be able to get a deal if they “stand together”.
The divorce bill costs would be spread out over 46 years, but the final figure is yet to be fixed.
The EU has not yet put forward what it believed the UK should pay the bloc if there is no deal.
The possibility of a no-deal Brexit is increasingly likely as ongoing negotiations become more desperate and Mrs May has been told by the EU that she must come up with more concrete proposals if she wants a breakthrough.
The European Parliament’s Brexit co-ordinator Guy Verhofstadt insisted Britain should be treated as any other third country would be despite both sides striving to remain “as close as possible” after the split.
The Treasury has said that the amount of the final Brexit bill is dependent on historical obligations.
On Thursday and Friday there will be an EU summit originally earmarked as the deadline for the Withdrawal Agreement to be finalised.
However, further negotiations are expected on the ongoing relationship between the EU and the UK.
President of the European Council, Donald Tusk, has warned a no-deal Brexit is “more likely than ever before” and said he had “no grounds for optimism”.