What if your business has problems paying VAT or PAYE ?

2 April 2013

It is sometimes the case that directors blame HMRC for their business failure. In fact calculating tax owed is not a massive administrative burden especially on PAYE and it should not be in dispute.  As such the inability to pay it is more a reflection on the business viability. Inability to pay usually means the business is insolvent

As we have covered many times before, if the Revenue and Customs issues a petition"> it is almost invariably because it has run out of options. HMRC does NOT issue petitions unless it is a last resort and patience with the debtor has run out.  Alternatively HMRC may send a letter threatening distraint.  We are seeing this as a more common form of collection as the thought of bailiffs turning up on the premises focuses minds.

Generally, to get to that stage the debtor  needs to have regularly failed to pay PAYE, then asked for a Time to Pay Deal (TTP). These have usually failed and the debtor has asked for a new deal. Once again, because the directors fail to cut costs and drive change, it fails and once again a TTP has failed.

As a director, if the company has had a time to pay deal or deals which have failed and you cannot keep up with the demands of the HMRC for repayment, look at a company voluntary arrangement as a permanent long term solution.

For example if you owe £100,000 to HMRC, it will usually allow say 10 months to repay the arrears. That's £10k per month. Can your business generate enough profit, say £100k profits to pay £100k back in JUST 10 months?

Whereas in a CVA you may pay back, say, £1k per month for 60 months. Can you afford £1k per month? This is surely better than falsely promising to pay £10k?

In addition, a CVA allows rapid cost cutting, redundancies can be paid by Government, you can exit onerous contracts and remove problems like unwanted leases quickly.

So don't blame HMRC for the company's problems, more often than not solutions like a CVA are the best option and HMRC WILL SUPPORT THEM!