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Table of Contents
- What are my responsibilities?
- What are the penalties for unpaid HMRC bills?
- What are my options for dealing with HMRC Arrears?
What are HMRC Time to Pay Arrangements?
Often when a company is facing financial pressure, it may have significant arrears to HMRC. Most companies are required to prioritise payments to generally suppliers when experiencing cash flow problems, in order to ensure the company can continue to trade. In these instances, short periods of arrears may mount up to HMRC, or in worse cases, your company may be subject to a Tax Assessment or Investigation, which results in an unforeseen liability.
Whilst HMRC do not have any priority or additional powers over other general creditors, once they become aware of such a situation, they are much more likely to commence formal recovery action.
If you have received a demand for repayment, that your company is unable to meet, this may result in HMRC instructing bailiffs to attend the trading premises to carry out enforcement action. Should this occur, it is likely to significantly impact your company’s ability to trade.
Depending on the level of arrears, and the period over which they relate, HMRC are also much more likely to issue a winding up petition that a general supplier.
If a winding up petition is served on your company, it will be advertised in the London Gazette shortly thereafter. Once advertised, the company’s bank will become aware of the petition, and immediately seek to freeze the company’s bank account.
Once you are aware of a winding up petition, as a director, you are also precluded from disposing of any assets of the business, even if only to secure short term finance.
Any of the above can have a disastrous impact on your business.
If you are concerned about your company’s HMRC arrears or have received demands for repayments that your company is unable to satisfy, it is imperative that you seek independent advice at the earliest opportunity.
At The Insolvency Experts, we have considerable experience with negotiating with HMRC on behalf of companies, either to delay any action being taken in the short term, or to assist the company with proposing a Time to Pay Arrangement in respect of its arrears.
How do Time to Pay Arrangements work?
A Time to Pay Arrangement is an agreement between your company and HMRC, to settle its arrears over a period of time.
Any requests for a Time to Pay Arrangement must be submitted in writing, together with documentary evidence of the company’s financial position and inability to pay the debt in full by the due date.
The exact monthly payments and timeframe will be determined on a case by case basis, depending on your company’s’ financial circumstances. We will assist in this regard by reviewing your short term working capital requirements, and cash flow forecasts to ascertain what is affordable.
It should be noted that HMRC are unable to agree to a reduction in the amount repayable, but may be willing to support repayments on a monthly basis, over a short period.
How to negotiate a time-to-pay arrangement with HMRC
If your business is in financial distress, paying taxes is often one of the first things you fall behind on. HMRC is the most common business creditor and almost all insolvent companies will owe them some form of debt.
Paying taxes late can imply to HMRC that your company is either insolvent or approaching insolvency and the electronic system which HMRC has in place means they are well placed to quickly identify late payers.
If you do need more time to pay your tax bill, a TTP instalment plan may be a viable solution for your company and the team at The Insolvency Experts can offer support to business owners and directors who are considering this option. However, before rushing into this as a way to bring your tax arrears up to date, it is useful to know what the process entails and the likelihood of you being accepted by HMRC.
A TTP arrangement allows for your HMRC debt to be paid back in instalments, typically over a period of up to 12 months although occasionally when a TTP is agreed it is for a longer period, but these are extremely rare. It is important to understand that HMRC are under no obligation to agree and period of time to pay so it should only be applied for in the most urgent circumstances.
If you foresee that you will be unable to meet your tax obligations, you should contact HMRC as the earliest opportunity or better still contact The Insolvency Expert. We can analyse your cash flow and help you put forward a realistic proposal to HMRC to help alleviate your business’s financial distress.
If you have a poor compliance history with HMRC, it is arguably more important that you seek specialist advice as you are more likely to have a TTP arrangement refused if you have not conducted your tax affairs well historically.
- HMRC states on their website that they prefer to be contacted via their telephone helpline, but in most instances you will need to produce your repayment offer and case in writing, along with copies of a cash flow forecast.
- You will need to explain why you are unable to pay, and how much you are able to offer as a monthly instalment. It is important to be honest and realistic with both yourself and HMRC about the amount your business can afford and not to overstate the amount. HMRC won’t agree to a TTP arrangement unless they are confident that your business will be able to manage the payments and offering to pay more than you can realistically afford could lead to your proposal being rejected.
- HMRC will also assess the long-term viability of your company, the probability of a TTP arrangement being successful and appropriate alternatives if you don’t manage keep to the plan. You will be advised of your rights and what the penalties will be if you don’t keep to the arrangement or falsify information in any way.
Key Points in relation to HMRC Time to Pay Arrangements
- It is important to obtain advice as early as possible, in order that negotiations with HMRC can start before they have commenced winding up proceedings
- HMRC must be satisfied that the company cannot repay the debt in full
- The proposal must stand a reasonable chance of being implemented and adhered to
- All future HMRC liabilities must be settled in full, and on time
- The Arrangement must be over the shortest timeframe possible, and ensure the debt is repaid in full
- The company must not have a poor HMRC compliance history