Taxes are the most common type of Company bill to fall behind with so don't feel like you're on your own in having to deal with Tax arrears. More often than not, companies prioritise trade suppliers in order to keep the business running and as a result will have fallen behind with Tax payments without ever intending to. Alternatively, you may have received a Tax Assessment or been subject to a Tax Investigation which has resulted in an unforeseen liability.

…Liquidation is often a cheaper alternative to negotiating a payment plan with HMRC and allows you to move on with your business free of its historic debt.

Contrary to popular belief, HM Revenue and Customs (or HMRC) do not have any more priority or powers than any other creditor. Where HMRC do differ is that when they do become aware of mounting arrears, they tend to be quicker to resort to formal recovery action such as instructing bailiffs or issuing a winding up petition. This can rapidly lead to problems in maintaining ongoing trade.

As there is often little warning that HMRC intend to issue a winding up petition, it is important not to delay dealing with the debt once HMRC have become aware of it.

There are 3 main options when dealing with HMRC Tax arrears:

1. Attempt to Negotiate with HMRC

You can approach HMRC yourself with a payment plan. These plans are known as a Time To Pay Arrangement or Time to Pay Agreement (sometimes just referred to as a TTP). Whilst this carries no additional cost to you, it is usually extremely difficult to agree sensible terms with HMRC directly as they will push hard for you to pay the Tax debt over a short period resulting in a very high monthly payment. You should also bear in mind that once a Tax payment plan has been agreed, HMRC will not agree to a reduced plan further down the line and will immediately start recovery action if you miss a payment.

2. Instruct Us to Propose a Payment Plan

We can approach HMRC to propose a Time to Pay Agreement on your behalf. As insolvency professionals, we can present a more structured plan to HMRC and one which more clearly demonstrates the negative impact of failure of the Company should HMRC fail to accept. This plan will be based on cash flow projections and be supported by financial comparisons between the proposed payment plan and the return to HMRC should they force the Company into Liquidation. By engaging us to put the plan forward on your behalf, you significantly increase the chances that HMRC will agree to a more realistic plan with you paying a smaller amount per month over a longer period.

3. Look to Restructure your Business

We look to rescue or restructure your Company through a formal insolvency procedure such as a CVA, Liquidation or Pre-Pack. This not only removes the difficulties of dealing with HMRC and their lack of support but also enables you to deal with any other debts the Company has built up. This is often a far cheaper alternative which also allows you to move on with your future business more quickly without carrying forward past financial difficulties.

Whatever route you choose, you should not ignore letters from HMRC, the Inland Revenue or any other Crown department as they can be quick to take recovery action resulting in you losing control of your business. It can be daunting to receive a Tax demand but there is always a solution for your business provided you get the right help soon enough.

For further help and guidance on Tax arrears solutions and information on your options or to discuss a Tax, VAT or PAYE payment plan, call us free on 0800 066 3122