Can’t You Pay Your Tax Bill?

If you’re unable to pay your HMRC tax bill, your first instinct might be to avoid the issue altogether. However, this is the worst course of action. Failure to address the situation will only lead to a snowball effect of accumulating interest, penalties, and the increased likelihood of HMRC taking enforcement measures against your business.

Fortunately, there are viable solutions at your disposal. You may reach an agreement with HMRC to establish a payment plan, or you may need to consider formal insolvency procedures like administration or liquidation.

This article delves into the intricacies of this matter, examining the potential consequences, available options, and associated timelines.

Remember, if you’re facing difficulties in settling your tax bill, seeking professional guidance is crucial. A qualified insolvency practitioner like ourselves can assist you in evaluating your options and navigating this challenging situation effectively.

HMRC Tax Debt Advice

Facing Trouble Settling Your HMRC Tax Bill? Here’s What to Do

If you’re a business owner grappling with the burden of unpaid HMRC taxes, fret not, for there are several steps you can take to resolve the matter:

1. Reach out to HMRC promptly. HMRC is often open to collaborating with businesses to find solutions to tax debt issues. They may be willing to approve a Time to Pay Arrangement, allowing you to settle your debt in manageable installments.

2. Be open and transparent with HMRC regarding your financial situation. Provide them with copies of your business plan and cash flow forecast, if available. This will aid them in comprehending your circumstances and evaluating your ability to repay your debt.

3. Be realistic about your monthly repayment capacity. Avoid committing to a Time to Pay Arrangement that you cannot sustain. Doing so will only exacerbate your predicament in the long run.

4. Adhere strictly to the terms of your Time to Pay Arrangement. If you encounter difficulties making a payment, immediately contact HMRC to explain the situation.

5. Seek independent guidance if all else fails. Our expertise lies in advising UK company directors on company debt matters.

Consequences of Unpaid HMRC Taxes

Failure to settle HMRC tax obligations can lead to severe repercussions, including:

  1. Debt Collection Agency Engagement: HMRC may enlist commercial debt collection agencies to pursue unpaid taxes. These agencies may contact you via phone, text, letter, or even visit your premises. However, they are not legally authorized to enter your property without your consent.

  2. Bailiff Involvement: HMRC’s distraint powers allow them to seize your company’s assets. An officer may visit your premises, inventory your assets, and either remove them immediately or leave them under a Controlled Goods Agreement (CGA). Under a CGA, you acknowledge HMRC’s ownership of the assets but retain possession until their sale. HMRC typically sells the assets within seven days of their visit. If the sale proceeds exceed your debt, you receive the surplus. If they fall short, you remain liable for the balance.

  3. Direct Bank Account Debits: HMRC has the authority to directly recover debts from your bank account. They must notify you in writing of their intention and schedule a face-to-face meeting beforehand. The final requirement is that you retain at least £5,000 in your account after the deduction.

  4. Court Proceedings: If HMRC takes you to court, you may be responsible for court fees and HMRC’s legal expenses on top of your outstanding tax bill.

  5. Company Liquidation: As a last resort, HMRC can forcibly wind up your company. Unlike private companies, HMRC does not require a County Court Judgment (CCJ) to initiate liquidation proceedings.

Will HMRC let me Pay in Instalments?

If your business is struggling to pay its tax bill, you may be able to negotiate a Time to Pay Arrangement with HMRC, allowing you to settle the debt in installments. However, this arrangement only applies to the current arrears; future tax bills must still be paid promptly and in full.

To secure a Time to Pay Arrangement, you must convince HMRC of your financial organization, commitment to regular communication, and ability to repay the debt within a year. Failure to pay other taxes while under this arrangement will be considered a breach of trust, potentially jeopardizing HMRC’s confidence in your company’s financial stability. This could have significant implications for future arrangements, such as a Company Voluntary Arrangement (CVA).

Therefore, it is crucial to incorporate all future tax obligations into your cash flow forecast to avoid further HMRC complications. Any default could trigger an automatic winding-up petition threat.



Navigating Tax Arrears: Four Practical Solutions

If your small business is burdened by substantial tax debts, our expert guidance can help you navigate this challenging situation. We offer a range of effective solutions tailored to your specific needs:

1. Time to Pay Arrangement: We can liaise with HMRC to establish a manageable payment plan that aligns with your financial capabilities. This option is particularly suitable for businesses demonstrating viability and a well-structured debt repayment strategy.

2. Company Voluntary Arrangement (CVA): Under the guidance of an insolvency practitioner, a CVA provides a structured payment plan for businesses. HMRC is receptive to CVAs when they are meticulously crafted and presented.

3. Raising Finance: Exploring financing options may be a prudent alternative to the potential consequences of neglecting HMRC payments. We can assist you in evaluating your options and securing the necessary funding.

4. Voluntary Liquidation: Voluntary liquidation may offer the most viable path if your company is unable to meet its financial obligations and faces imminent action from HMRC. We can guide you through the liquidation process, minimizing stress and ensuring a smooth transition for company directors.

In addition to these primary solutions, we provide comprehensive support in addressing various aspects of HMRC tax debt issues:

  • HMRC Enforcement Action: We can help you understand your rights and options if HMRC takes enforcement measures such as issuing a distraint warrant or initiating winding-up proceedings.

  • HMRC Security Bonds: To safeguard against perceived insolvency, HMRC may require a security bond. We can explain the implications of providing a security bond and negotiate with HMRC to potentially reduce the required amount.

  • Personal Liability for Tax Debts: In certain circumstances, company directors may face personal liability for their company’s tax debts. We can advise you on your personal liability and assist in protecting your assets.

Our team is committed to helping you navigate tax arrears effectively and safeguard your business interests. Contact us today to discuss your specific situation and receive tailored guidance.