For many companies, paying HMRC can be the largest single expense each month, particularly where the company operates in the service industry. Whilst for some it may seem like the easy option, not paying tax can result in HMRC distraint with bailiffs turning up at the door, or worse HMRC could wind up the company. What is needed in most cases is HMRC debt management.
Why you should consider HMRC debt management first
When times are tough, a lot of directors will ensure that suppliers are paid, through fear of being put on stop, which in a lot of cases can be to the detriment of HMRC. For some HMRC seem like the easier option not to pay as they cannot refuse to supply like a supplier can. However, as HMRC does not have this option, it does have some strong powers where it is not paid and it is therefore important to tackle the possibility of becoming insolvent before HMRC hits. HMRC remain in a position where they can send a bailiff in to a company, without notice through their distraint powers. For most, losing goods and equipment to a bailiff at a time where cash flow is already tight can lead the company to a position where it simply cannot trade and therefore has no way to turn around.
Requirements for HMRC debt management
HMRC generally want to help companies to pay their debt over time and do not want to see it wound up, resulting in more debt being written off. They therefore offer Time to Pay (TTP) arrangements for companies. HMRC's debt management solution can allow the company up to twelve months to pay the debts off, with no further penalties being imposed, provided that they are satisfied that certain criteria are or will be met –
- The company’s cash flow shows that it can afford to pay the debt in up to twelve months
- The company is able to pay all ongoing taxes on time
- All returns due have been submitted
- There is a plan for the whole debt to be paid
Cashsolv’s experience with HMRC debt management
By using a reputable professional firm to put forward a TTP request, HMRC are more likely to get all the information needed to consider the proposal and therefore the likelihood of it being accepted are higher. At present, a decision on the HMRC debt management requests we put forward are generally made within 24 hours.
As an example of a time when you may think it too late to request a TTP, I was recently contacted by a director who had received a visit from HMRC’s bailiff who listed items they were going to remove if the debt was not paid in full within five days. The company simply did not have enough money to pay in full, and without these assets the company could not continue to trade. It was though clear that the company could afford to pay the debt within 12 months. We put a formal request to HMRC which was accepted the same day, with the bailiffs dis-instructed and the company free to continue to trade with the assets.
Putting forward a TTP request to HMRC can be done quickly and simply with the right information available and can buy the company valuable breathing space needed to get its cash flow back on track.