Can't pay tax bill?
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What to do if you can’t pay your tax bill

If your business is in financial distress one of the first signs may be finding that you can’t pay your tax bill on time. Struggling to pay VAT, PAYE and in some cases even Corporation Tax are common problems for directors and business owners. It is well documented that HMRC are not the most lenient of creditors and are under more and more pressure to deliver improved tax compliance. Burying your head in the sand is therefore not recommended and can result in high penalties for late payment, or HMRC even resorting to issuing a bankruptcy action or winding up proceedings against your business. It is important to tackle the possibility of becoming insolvent before HMRC hits.

What happens when you can’t pay your tax bill?

When you can’t pay your tax bill you will, as you might expect, start to receive threating letters from HMRC demanding payment. If the letters go unanswered you may be subject to an unexpected knock on the door from an HMRC officer, with the risk of a distraint warrant. A distraint warrant allows the HMRC officer to seize assets, to be removed from your premises and sold at auction in order to recover as much as possible towards paying off your arrears. A County Court Summons or Statutory Demand can also be issued to implement a deadline to force payment. Failure to respond and make payment will normally end up with a winding up petition being issued against your business. This is no idle threat as statistically HMRC are actually responsible for issuing more winding up petitions than any other creditor.

For those who refuse to pay, penalties can be significant. Late payment penalties and interest charges can continue to accumulate on the debt until it is paid. From April 2014, we will be required to start charging fees whenever we have to take enforcement action, which could increase the size of the debt even further. The range of actions we may consider includes removing personal or business possessions to be auctioned, so that the funds raised can be used towards settling the debt, taking court action, or starting insolvency proceedings”. HMRC Issue briefing, January 2014

What is the best option when I can’t pay my tax bill on time?

The first thing to do is to not ignore any correspondence from HMRC. A willingness to comply and demonstrate that you are not deliberately seeking to avoid payment will help gain the trust from HMRC and will go a long way towards avoiding any legal action. When you know you can’t or are not going to be able to pay your tax bill, you are highly recommended to seek expert advice at the earliest opportunity, ideally before HMRC’s demands for payment escalate to enforcement action. From April 2014, HMRC will begin imposing fees whenever they have to take enforcement action, so it would be wise to communicate payment problems early on, and try to reach a ‘time to pay’ arrangement.

Our experts are able to manage the situation and help you avoid any penalties and maintain future confidence from HMRC. We can negotiate a Time to Pay Arrangement on your behalf, which involves implementing a payment plan over a period of up to 12 months. Our team of experts have built strong relationships with HMRC and are more likely to achieve a satisfactory agreement for both parties. A Time To Pay Arrangement will require that you can pay your future tax on time so that the debt to HMRC doesn’t increase and you will need to be able to show good reason for not being able to make payment in full at present. We can help you to present your best case.

What if a Time to Pay Arrangement has already been declined?

Don’t give up; we have achieved success where others have failed and also have a number of other the options available to you. Our team of experts will provide you with specialist advice on what to do next.

Contact us now if you can’t pay your tax bill, or foresee any problems. Intervention at the earliest opportunity is more likely to result in a favourable outcome and punitive penalties can be avoided if early enough action is taken, even if you don’t make payment on the due date.


For more information on HMRC Time To Pay, view our relevant pages:

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