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HMRC Payment Problems - Worried Directors Guide

Written by Robert Moore Marketing Manager 29 April 2021

We face HMRC payment problems. What can we do?

If your business is behind with PAYE and VAT payments, then your business may be insolvent!

HMRC 7 Day Warning Letter

You MUST ACT or you may get A HMRC 7 day warning letter (click on the thumbnail above) 

HMRC are known as "sophisticated" creditors. As such, they know all the tricks in the book in order to collect the monies owed. The HMRC will always pursue a debt. Sometimes a company thinks it has got away with not paying as they haven't heard from HMRC for years, but, don't you worry... a demand will suddenly come along!

Another important point to note is that if HMRC say you owe them £50k then you do owe them £50k. In other words, there is no dispute. They do not need to go to the court and request a County Court Judgement, followed by a Statutory Demand. The HMRC will write and if the money is not paid they will go straight to the next step of issuing a winding up petition. HMRC issue some 60% of the winding up petitions against UK companies.

When the pandemic is over HMRC will start to step up efforts to collect tax as it will be urgently needed. The moratorium on winding up petitions will end in June 2021

Non-payment of PAYE and VAT demonstrates to the HMRC that the company may be insolvent. So, you need to act properly and responsibly and deal with this serious threat to your company.

Could I be personally liable?

If a company is insolvent you may be held personally liable for the debts, if you continue to trade KNOWING the business is insolvent and doing nothing about it. Wrongful trading can become an issue where there are ongoing tax arrears and the company then enters insolvent liquidation.

So, act carefully, keep notes of any decisions and always write names of people you speak to at HMRC down. Take advice from experts, above all act promptly as delay may just lead to more problems for you as directors. 

Bear in mind that HMRC has preferential creditor status.  In other words, they will rank ahead of the bank and other floating charge holders.  This will mean you are more exposed personally as many of these lenders often have personal guarantees from you.  See this page for more details

What are my options?

Once you have read more about the problem in our guides (Is our Company InsolventDirectors Do's and Dont's and Warning Signs), the options you have available are:

1) Ask for time to pay the debt. HMRC has a Business Payment Support Service. However, in order to be approved for this you will need to have had a good compliance record in the past and have a good reason to convince the HMRC that you are going to be able to repay the debt. Any missed payments will often trigger HMRC to issue the 7 day letter action as shown above.

2) Consider a company voluntary arrangement 

3) An administration solution which can protect the company from aggressive legal action from HMRC.

4) Introduce more money into the company to pay the tax debts?

5) Trading out, visit this guide to how to deal informally with the problem. This can avoid formal approaches like Voluntary Liquidation, CVA, Compulsory Liquidation and Administration.

Tips for dealing with Arrears.

Try to plan the cashflow of the business well in advance - you have a legal obligation to do this! If the directors do not think the company has sufficient cash to trade they should consider the obligations and options and plan a way forward.

Don't wait until legal actions have been taken against the company to ask for a "time to pay" deal with HMRC. Its better to ask for help BEFORE arrears build up.

Don't be too ambitious in planning repayment; Email for advice on how to do this. We can send you a daily cashflow forecast

Ask for 18 months to pay back PAYE, knowing that you will may get 9-12 months at most.

Ask for 12 months for VAT and they may accept or offer 6 months.

If your cashflow forecast indicates that the company can be viable, but the business cannot afford that fast a repayment programme, then you must consider a company voluntary arrangement - CVA.

Don't wait too long to get professional turnaround help. Call the experts on 08009700539 Contact us for further details.

Category: HMRC Time to Pay Arrangement

A Worried Director

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