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HMRC Time to Pay Arrangement for VAT and PAYE

Negotiating a Time to Pay with HMRC

If you are unable to pay your company's taxes on time, you have the option of negotiating a Time To Pay (TTP) Arrangement with HMRC. This is a plan that gives your company extra time to pay your tax liabilities. This type of plan also has the benefit of preventing further penalty charges from being applied to your outstanding tax amount.HMRC will allow you more time to pay your company's:Corporation tax VAT PAYETime to Pay arrangements are based on the realistic ability to pay, the company's stability and past payment history. Is a Time to Pay Arrangement right for you? If your business has tax arrears that have accrued due to cash flow shortages, you could benefit from a Time to Pay arrangement.You will only be considered for this if HMRC is confident you’ll be able to make sufficient repayments over the agreed period.HMRC will not consider you if you have:A history of late, overdue or incorrect tax returns Not adhered to previous arrangements A lack of financial information to support your request Overdrawn directors' accountsIf you are not confident negotiating a Time to Pay with HMRC, or your offer is rejected, seek expert company recovery advice. Consultants can help you explore other options such as administration, restructuring or voluntary liquidation. Negotiating a Time to Pay with HMRC There are two main scenarios that might lead you to negotiating a Time to Pay arrangement with HMRC:You become aware that you will be unable to pay a debt when it's due. You miss a payment date and receive a payment demand – e.g. a tax bill, or letter threatening you with legal action.In both cases, it's best to contact HMRC as soon as possible.Those that the first scenario applies to, should call the Business Payment Support Service.Those that the second scenario applies to, should call the HMRC department that sent the payment demand. 

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Negotiating a Time to Pay with HMRC

VAT Penalties and Surcharges from HMRC

From 1 January 2023, new penalties for late VAT filing and payment now apply. This applies to everyone who is to submit a VAT return for accounting purposes, on or from that date.Interest which is applied to late VAT payments and late HMRC payments has also changed.It is important to understand the changes; some being an improvement on the previous regime, but some being ways to catch out taxpayers and related agents. For that reason, we explain it for you here (You may also see this page on the Gov.uk website, for details). Late Filing of VAT This system is now points based. Taxpayers will receive a point for each VAT return that is filed late. When the taxpayers' total number of points reaches a threshold, a fixed £200 penalty will be applied. This penalty is to be applied for each and every additional late VAT return after reaching the threshold.The frequency of which the taxpayer files their VAT returns will determine the threshold:Annual returns – 2 points Monthly returns – 5 points Quarterly returns – 4 pointsHow long do my points remain? It should be noted that there are ways to reset your points.If the taxpayer reaches their penalty threshold then points expire after a period of compliance If the taxpayer is below their penalty threshold then points expire after 24 hoursWhat is a period of compliance? Ultimately, this refers to a period in which all returns have been filed on time and all outstanding VAT returns for the previous 24 months must have been submitted. Following this period, the taxpayers' points total will reset to zero.You can see the table below for more informationSubmission frequency Penalty points threshold Period of complianceAnnually 2 24 monthsQuarterly 4 12 monthsMonthly 5 6 monthsIs there a link between the amount of late filing penalty and the VAT due on the return? Unlike in the previous regime, this time round there is no relation. This means repayment traders and taxpayers filing null returns will be in the midst of late filing penalties for the first time. Late VAT Payment The changes have been made to encourage struggling taxpayers to reach out and engage with HMRC as soon as possible.Penalties applied are based on how late the payment is. So the sooner you pay, the lesser the penalty rate.Between days 1 and 15, if you agree on a payment plan or pay the owed VAT in full, no penalty will be charged Between 16 and 30 days overdue, a first penalty will be calculated at 2% of the VAT unpaid on day 15. If at 31 days or more overdue, along with the first penalty, you will be charged an additional 2% on the VAT owed on day 30 From day 31, a second penalty applies, charging daily at an annual rate of 4% of the outstanding amount, for the duration it remainsWith both penalties in mind, if a Time to Pay Arrangement (TTP) is agreed upon with HMRC then this is treated the same way as a payment. The penalty clock will stop on the date of the TTP application. If the TTP terms are broken, full penalties will be charged and it will be as if the arrangement never existed. Time to Pay Note: You must request a TTP within 15 days of the due date for the penalty to not apply.Please do speak to us as soon as possible, preferably before the deadline, if you’re unable to pay VAT or PAYE. At KSA, we are experts in speaking with HMRC, so let us help you and use our skills to try and arrange a time to pay deal – this can certainly reduce the pressure and help you out with the repayments, avoiding penalties. Period of Familiarisation: For the first year these new rules are in place, HMRC will not be charging for the first caveat to the first penalty i.e. the 2% at day 15. What does this mean for you, shall you ask?As a taxpayer, you can pay your VAT bills up to 30 days late, penalty-free…though of course, we do not recommend it – and remember, you will not be escaping interest for this too. Interest The interest for late payment of VAT will be charged at the Bank of England base rate plus 2.5% - as with other taxes.The repayment supplement will be withdrawn for VAT periods starting on or after January 1, 2023. Instead, repayment interest will be payable by HMRC, on any VAT that you are owed, at the Bank of England base rate minus 1% (with a minimum of 0.5%). The amount will be calculated from the day after the due date or date of submission (whichever is later) until the day HMRC pays the repayment VAT amount due in full.So, this is a basic overview of the changes for you, with further guidance expected in the new year. Get in touch with our team today to avoid being caught out by these penalties. We would love to help you out - 0800 9700539

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VAT Penalties and Surcharges from HMRC

Can HMRC take my house for failing to pay company debt?

The simple answer to this common question is, no – so please be reassured. However, if you have been a very negligent or fraudulent director then it could be at riskThey can only take property owned by the company – no hired or rented assets, nor property under your own name.If your company fails to pay its debts to HMRC, they will take enforcement action to get the money they are owed. Only company assets are at risk – not your everyday personal possessions. What enforcement actions can be taken?Taking control of goods Court order Taken through your pension or earnings Debt collection agencies Direct recovery of debtWhen could they take my House? Sole trader or partnership, having unlimited liability. This means creditors like HMRC, can take personal assets of yours, if your business cannot pay what is owed. This is because there is no legal separation between your business and you. If your house is registered in the company’s name. HMRC can force the company into a compulsory liquidation, so that the property’s value can be realised and shared among the company’s creditors, to repay. Likewise, if the house is registered this way, it can be taken and sold, at any point, if you live in it or not. If you have an overdrawn directors account. This is when you, as a director, owe the company money. This occurs when a profit-making company is advised to save tax by paying directors a small salary from the profit reserves, each month. Then the company has not paid the correct tax amounts, hence HMRC are chasing them up to do so.  If the company goes into liquidation, you will be chased personally as this is money owed to the company. Therefore, to pay the money owed, your personal possessions i.e your house or car, may be taken and sold to pay back the company what you owe.If your house was used as a personal guarantee for credit or other purposes, then being unable to pay your debts means your house would be at risk.  It is difficult for houses to be repossesed under bankruptcy laws as it depends on lots of things like your dependents etc.If you are worried about losing your house due to company debts then we can advise on the situation so please call us.

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Can HMRC take my house for failing to pay company debt?

What Happens If I Pay Corporation Tax Late – Are there Penalties?

What is Corporation Tax? Corporation Tax is the tax companies are required to pay on their profits. The amount of tax to be paid, depends on the amount of profit made, therefore it is the directors’ responsibility to ensure all financial documents and accounts are accurate, so the appropriate amount of tax is charged.Within 9 months of the financial year end, a CT600 file needs to be sent to companies’ house. Failure to do this, can have consequences. For any help with sorting out accounts, or if you are aware you cannot pay your tax bill call us today for expert advice on 07833 240 747 or 0800 9700539. What about if I pay late? What happens? Paying corporation tax late does not have penalties. What does have penalties, is filing your accounts late. Even if you cannot afford to pay the tax, accounts must be filed on time. If you cannot pay the complete amount in the time, then you can contact HMRC and arrangements can be made. For example, funding can be analysed or HMRC may agree to a Time to Pay deal.If you do not file your accounts by the required date, which is 9 months after the accounting period ends, the following penalties occur :Period you are late by The penalty at the basic rate The penalty if you have already failed the deadline, 3 consecutive periodsMissing the filing deadline £100 £5003 months £100 £5006 months 10% of the total unpaid tax amount 10% of the total unpaid tax amount12 months 10% of the total unpaid tax amount 10% of the total unpaid tax amountFor late payments, you will only be charged interest at the rate of 3%, on the outstanding amounts due. However, if you are a company who pays your tax in monthly instalments rather than the bulk at once, and you deliberately pay the incorrect amount of your instalment, or pay it late, you may have penalties. See the website below to find out your penalties if this applies to you.https://www.gov.uk/guidance/corporation-tax-paying-in-instalments/penalties-on-instalment-paymentsIt should be known that If you fail to keep an adequate record in relation to the accounting periods, you risk being liable for a £3000 penalty fee. Can I go to court? No. You cannot go to court for late payments or late filing. All that HMRC want, is the tax to be paid. You will be issued letters demanding the payment. Your credit rating will not be affected. In the worst case scenario, HMRC have the authority to wind up your company, or seize your assets. It is very rare that the directors themselves will be personally liable.Contact us today for any further enquires. We are experienced in dealing with HMRC so can help you.

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What Happens If I Pay Corporation Tax Late – Are there Penalties?
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How does HMRC collect its debts?

HMRC is what is called a “sophisticated creditor” in that they know all the best methods of collecting in overdue taxes.  What is more, they have economies of scale that ensure that it is worth their while to chase even the smallest of debts.HMRC will use various methods to ensure that taxpayers pay what is due:Seizure of Goods The use of penalties to deter non-compliance Statutory demands Winding up petitionsHMRC is responsible for all taxes and duties and there is no particular difference in the methods used for collecting taxes, whichever type of tax it is.  VAT and PAYE are perhaps pursued more readily as they do make up the largest types of tax that a company pays.  VAT in particular as the company in question has in effect collected the tax from its customers and should pass it on to HMRC. The steps that are taken by HMRC - HMRC debt collection process Reminders In the first instance HMRC will start collecting in debts by issuing payment reminders and these can be in the form of letters and even SMS texts.  Failure to pay the amount owed may well mean that it is outsourced to a HMRC debt collections agency.  HMRC have started to use these debt collection agencies more and more in recent years.  The amount HMRC pays to private-sector debt collectors has quadrupled in the past 5 years, suggesting it may be stepping up the pressure on people who cannot pay their tax bills. HMRC debt collection agencies are as follows:1st Locate (trading as LCS) Advantis Credit Ltd Bluestone Credit Management Ltd BPO Collections Ltd CCS Collect (also known as Commercial Collection Services Ltd) Moorcroft Oriel Collections Limited Past Due Credit Solutions (PDCS)These agencies are likely to start sending more reminders in a more aggressive manner threatening legal action or the seizure of goods. Control of Goods As registered bailiffs, the agency may well take action to take control of goods or property at the companies registered address, to then sell on at auction in order to settle the debt.  This is known as distraint.  For more information on the regulations see here.The officer either from the HMRC, or a certified bailiff contracted by HMRC, is issued with a Writ of Control. They will then send the Notice of Enforcement to the debtor, on 7 clear days’ notice, excluding Sundays and bank holidays.This notice period gives the debtor an opportunity to contact HMRC and either pay in full or request/negotiate payment by instalments.If payment in full is not made within this 7 day period or an instalment arrangement agreed, the officer will attend the debtor’s premises after the expiry of the 7 clear day notice period to take control of goods (formally called seizure). If the debtor doesn't sign a Controlled Goods Agreement (formerly Walking Possession) or make payment in full, the officer can make arrangements to remove goods and sell the goods over which he has taken control (seized).Obviously, in many cases the value of goods belonging to the company is not enough to cover the costs of the debt.  However, the threat of removal can focus minds and funds found elsewhere.If the seizure of goods does not yield results then HMRC may as a last resort issue a winding up petition. Winding up petition Please refer to this page for information about the winding up petition process.In essence HMRC will instruct its solicitors to petition the court to rule that the business cannot pay its debts and should be closed and wound up. This means that the debt to HMRC cannot get any worse as the company will stop trading.  It is unlikely in most cases that HMRC will get its money except perhaps in the more high profile cases such as with football clubs that are often saved at the last minute when faced with a petition.Due to Covid-19's impact over the last two years  HMRC have held back a fair bit on collecting taxes recently but they sent out a statement that they would be chasing taxes hard from 2022.

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How does HMRC collect its debts?