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Can’t afford to pay HMRC demands

Written by: John A Waller, Director. Reviewed January 18th, 2021.

Companies throughout the UK can’t afford to pay HMRC demands when received. Many businesses and individuals are fearful or pursued by the HMRC for tax unpaid. However, many merely have no intention to pay and evade tax. Others are unable to pay. Sadly, tax is an important issue. Many simply cannot handle the situation and fail to account. However, the tax must pay if due.

Accountants often tell stories about how shocked clients are when advised of their crown liability. They forget the tax due to profit or earnings, but somehow they spend it raising financial issues when payable.

We all expect it, but I’m confident. 

Running a business is not easy. Indeed, most people have no intention not to pay creditors and HMRC. However, stresses from trading creditors who can stop you from trading often are paid sooner than the HMRC. Provisions required to pay Vat leave directors exploring can’t pay VAT options and Corporation Tax due to trade creditor pressures. Issues also arise not paying monthly PAYE and NI. Suddenly, an HMRC demand arrives, and your cash flow does not allow payment. You then need to perform the action before matters spiral out of control. So what are you to do?

Those who account for the inevitable tax liability avoid such issues as:

  • Penalties for late payment;
  • Interest charged on unpaid tax.

However, those who fail to account for tax liabilities ‘run the gauntlet’. Not having the funds available to pay the tax liability, even if profitable, face the above and possible insolvency via HMRC, attempting to wind your company with a compulsory liquidation (Read What is a Compulsory Liquidation? &dealing with a winding-up petition.

Dealing with VAT

Can’t Pay HMRC?

If you cannot pay your tax bill on time

Contents

  1. What you should do;
  2. Before you contact HMRC;
  3. What happens next.

Use of HMRC Time to Pay Helpline

HMRC may be contacted through the Self Assessment payment helpline.

HMRC helpline number – 0300 200 3822

Monday to Friday 8am to 4pm.

HMRC has made it easier to apply for a Time to Pay online.

If you cannot pay your tax bill in full

Contact HMRC to discuss the support they may offer.

HMRC may propose you pay what you owe in instalments. This is called a Time to Pay arrangement.

HMRC Time to Pay coronavirus changes applying online

The online service now allows you to pay taxes up to £30,000, not £10,000, as previously.

You can now pay over 12 months by Direct Debit. To qualify, you must:

  • filed all tax returns up to date
  • paid all other tax debts
  • have no current plans on going with HMRC;
  • ensure you set up the plan 60 days or more before the due date of a debt.

Interest is still., charged however.

will be applied to the outstanding amount.

You might still be able to use Time to Pay if you owe more than £30,000 or need more than 12 months – you’ll just need to call the helpline instead. You’ll also need to call to discuss tax liabilities other than Self Assessment.

To access the online system, sign in your Government Gateway user ID and password.

Action required when you can’t pay HMRC.

So what should you do if you are in the latter situation? As one famous person said on a sitcom. ‘Do not panic! 

Establish immediate contact with the HMRC once collected, and explain your predicament. This may be contrary to how you feel. However, the HMRC will listen and help. Their job is to collect tax for the economy. However, many forget they are genuine human beings and remain, wherever possible, wanting to sort out your tax affairs with their cooperation and support. 

Once you have established a dialogue with the HMRC and advised of your inability to pay, the HMRC will consider your circumstances. At this stage, PLEASE remain in conversation with your case officer. The problem will not go away. Please note, being a company director of a limited company in England and Wales means you have to pay tax as and when due, and maintain records accurately reflecting any taxes owing.

Do not ignore any communications from the HMRC. The result is HMRC may commence an action to recover the debt, resulting in my company has received a Winding Up petition against your limited company, and even a bankruptcy proceeding against you for the personal debt.

The later situations are to be avoided if you can’t conclude an acceptable agreement.

If this happens, contact licensed insolvency practitioners like the team at HBG Advisory.

An IP can offer support and licensed advice, explaining the options available for your situation. You must act once you are aware of your case, as this will help the IP assist you and your company’s financial position.

I can’t afford to liquidate my company.

I can’t afford to liquidate my company. Speak openly to the Insolvency Practitioner. about business recovery.

We at HBG Advisory work hard to assist companies in distress and will advise on ways to move forward.

Seeking advice when you can’t pay HMRC.

Seeking advice does not mean your limited company is insolvent. However, the guidance offers recovery for a viable company.

HBG Advisory has supported many businesses throughout the UK, and directors as individuals who struggle to pay tax. Please contact us and let a member of our team explain how we help and ease your mind. Providing free insolvency advice for your company. Please call us on 0330 056 3120

This web page includes public sector information licensed under the Open Government Licence v3.0.


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