READ TIME: 13 Minutes
John A Waller
Reviewed June 5th,2021.
Dealing with HMRC company debt is important.
Having outstanding Her Majesty’s Revenue and Customs (HMRC) debts, whether Income Tax (PAYE), NI or VAT arrears, requires action to rectify the debt as soon as therefore possible. HMRC debt is classified as a priority debt. The outcome of failing to pay can be severe, and commence a court action to force payment, eventually prompting bailiffs.
Dealing with HMRC Company Debt remains paramount.
When first setting up a limited company. As part of their business plan, directors should then therefore set aside a considerable creditor, HMRC.
Company Directors must ensure they meet the demands and needs of operating as a company complying with HMRC needs.
Regularly check for changes in tax matters, especially employee tax. DO NOT FORGET to register for VAT if you know your business will exceed the current threshold of £85,000 per year.
Many directors ask: ‘Can’tpay VAT what happens next?
ENSURE at all times, the company’s books of account are maintained, monthly management accounts are prepared, and if in doubt? Ask for an explanation and clarity. Not knowing this is not a defence as a director. The responsibility, therefore, sits robustly with directors, especially for HMRC issues.
Contacting HMRC Debt Management and Banking Team
Should you wish to contact the If you need to speak with someone at HMRC’s dedicated Debt Management and Banking Team about your business finances, contact details are as follows.
- HMRC Debt Management helpline phone number is 0300 200 3887.28
Suppose the HM Revenue and Customs (HMRC) have sent you a demand for the tax you cannot pay. It’s then essential to establish contact with them to arrange a settlement plan as soon as possible. Failing to do so, therefore, triggers the HMRC to instruct proceedings.
The Limitation Act 1980, s 37, stipulates no time limit before HMRC is required to chase a debt for tax once an assessment or demand is issued. Further, s 9 and s 24 of the Act does apply a six-year limit for NICs. DMB chased old debts, issuing letters to unpaid taxpayers.
- Control company debt.
- Avoid Court proceedings with HMRC.
- Pay VAT due – Pay your VAT on time – avoiding interest and penalties.
- Avoid late VAT payments.
- Evade HMRC recovery process or any form of recovery action.
- Deal with HMRC on time – Do not avoid them.
- Ensure you account for and pay corporation tax as due.
- Do not let a tax or VAT liability build up – If in trouble, seek help from an insolvency practitioner.
- Do not hide unpaid VAT.
In the 2018 budget, the proposed status of HMRC would then change, effective April 2020.
The current Pandemic, though, has, therefore, somewhat changed circumstances. Do we await the outcome?
HMRC debt is perhaps the one creditor; most directors have nightmares about it. They fear collectors knocking on the door, demanding payment. Once the HM Revenue appears at your door, other creditor pressure then appears insignificant.
HMRC is perhaps the one creditor; directors ignore when cash is tight, yet they are the most diligent collectors.
The revenue has plans afoot, though for serial late payers and defaulters. The net is closing. Remember, the Pandemic is putting the country into massive debt.
We can therefore help you resolve your issues with HMRC or restructure your company with a clear head.
At HBG, we are here to help.
Daily, companies are falling into debt with HMRC. Many cannot pay HMRC on time. Indeed, they fear dealing with HMRC. We forget they act on behalf of the public.
Further, detailed information may be found reading ‘clear HMRC Debt‘.
It is in the interest of HMRC to listen and try to assist. They, though, want the facts. Read below for further assistance:
Each department has slightly different criteria.
What is important is then making contact quickly.
We are not aware of time scales, but:-
If you cannot make a payment as a direct cause of the coronavirus, you may hold payment for your self-assessment, due July 2020 until January 31st,2021.
Ensure you contact HMRC Coronavirus (COVID-19) helpline; if you cannot, pay other tax bills.
Then, ensure you make notes, including date, time, whom you speak with, and your discussion details.
And the coronavirus then affects your business (COVID-19), then claims the Self-Employment Income Support Scheme.
If you fail to satisfy the criteria, then, providing you owe less than £10,000, you may qualify for a Time to Pay Arrangement online?
Contact Self Assessment helpline if you’ve missed your payment.
Self Assessment Payment Helpline
Telephone: 0300 200 3822
Monday to Friday, from 8 am to 4 pm.
Sometimes HMRC may offer you a time to pay arrangement if you cannot pay other taxes.
If you’ve received a demand for payment, then call the office as detailed in your letter. Failing which,
The Payment Support Service (BPSS) is the HMRC helpline to help negotiate instalment terms for tax debt owed nearing payment, but the taxpayer cannot pay in full by the due date.
The helpline number for Business Payment Support Service (BPSS) is:
Payment Support Service
Telephone: 0300 200 3835
Monday to Friday, from 8 am to 4 pm.
Nominated partners in business partnerships may negotiate a Time to Pay Arrangement with HMRC on behalf of the partnership or individual partners.
Ensure you secure immediate contact; therefore, with the HM Revenue and Customs when you miss your payment. How you contact HMRC depends on what you need to pay. Read management support below, which should help find the exact point of contact.
However, you may then incur interest due to late payment. So avoid penalties by contacting HMRC as soon as possible, noting the time and date along with whom you spoke.
Let the HMRC know you are serious in wanting to resolve your situation honestly.
- Unable to pay the forthcoming Tax Bill;
- HMRC may offer part payments for due tax;
- Time to Pay (TTP) plan;
- Instalment plan;
- Business Payment Support Service (BPSS) is the point of contact before the tax due date;
- Self Assessment Payment Helpline is for when you have missed the deadline, and you are under self-assessment;
- Large Business Unit Time to Pay (TTP) plans in place for those taxpayers who are under Large Business Service (LBS) and use the Large Business Unit (LBU);
- Large Debt Unit is for indirect tax debts of £150,000 or more;
- A TTP plan needs to be supported by realistic, achievable figures. Remember, it is not there to drag payment out with no attainable end;
- Seek professional help as the HMRC see through weak plans.
Support handling HMRC Debt in the UK.
- Citizens Advice – Help for personal and business tax problems. – 03444 111 444;
- Business Debt line – Support for self-employed people across the UK with debt and money management issues. – 0800 197 6026;
- TaxAid – 0345 120 3779;
- Advise UK – 0300 777 0107.
Example of HMRC Letter
When a limited company director discovers they have issues with their payments, this may indicate the company is therefore insolvent; therefore, it requires attention.
So ensure you speak to one of our Insolvency Practitioners, who can help with your crown debt problems on 0800 612 5448.
The tax offices provide Self Assessment Payment Helpline</a, to help businesses in financial arrears. It’s offered the opportunity to negotiate instalment terms for tax arrears that an individual may have while under self-assessment tax.
HMRC DEBT Self Assessment Payment is 0300 200 3822.
Depending on the financial situation, if a limited company. Options are available.
Suppose you wish to close the company for good. You may use the following insolvent procedures:
If you to maintain the company:
HMRC had deferred VAT payments for three months ending June 2020.
Any deferred UK VAT remains due 2021 – dates vary.
VAT not paid during the period is paid by the end of the 2020/21 financial year, which ends on March 31st 2021. The same date as for all UK monthly VAT payers. But the time for quarterly VAT payers, their VAT filing deadlines will determine the majority, so: March 31st 2021; April 30th 2021; or May 31st 2021.
- There has been no mention of interest charges on deferring VAT.
- No allowances are in place for businesses with special schemes, Eg: annual VAT payment.
Contact HMRC and join the VAT deferral new payment scheme.
The VAT deferral new payment scheme opened 23rd February 2021 up to and including 21 June 2021.
The new scheme allows you:
- To pay your deferred VAT in equal instalments, interest-free
- Choose numbers of instalments, from 2 to 11 (depending on when opted to join the scheme).
How to join
Before joining, ensure you have:
- your VAT registration number;
- created your own Government Gateway account;
- Submitted any outstanding VAT returns from the last 4 years – otherwise, you’ll not be able to join the scheme;
- correct errors on your VAT return as soon as possible;
- Ensure you know how much you owe, including the amount you originally deferred and how much you may have already paid.
To join the scheme. HMRC require you:
- Join the scheme yourself; your agent cannot do this for you;
- Have deferred VAT to pay;
- Be up to date with your VAT returns;
- Join by 21 June 2021;
- Pay the first instalment when you join
- Pay your instalments by Direct Debit. However, if you’re unable to pay by Direct Debit, there’s an alternative entry route).
However, If you join the scheme, you may still have Time to Pay arrangements for other HMRC debts and outstanding taxes.
If you do not attempt to negotiate, then HMRC may consider ‘enforcement action’ to recover the money from you.
When the HMRC evaluates, you are unable to get your payments up to date with more time. They may decline an arrangement with you and demand immediate payment of your tax debt. Failure to pay immediately ensures the HMRC commences ‘enforcement action’ to recover outstanding tax debt.
The HMRC uses many ways to collect tax, no matter how insignificant:
- Issues fines and penalties.
- Uses statutory demands to encourage payment.
- Failing payment, so issuing a Winding-up Petition to the company for not paying tax.
- Finally, seizing goods to cover the cost and tax not paid.
The HMRC remains responsible for collection on behalf of the crown for duties and taxes in the UK.
PAYE & VAT is aggressively collected, as they are the more significant part of the tax due.
VAT, though, chased the hardest as you collect VAT on behalf of the HMRC.
You must understand clearly what HMRC debt collectors remain legally authorised to carry out when collecting unpaid tax. For example, having a visit from an HMRC enforcement officer or bailiff means both are legally entitled to force entry into commercial premises only, provided a court has authorised such action.
For a further detailed reading on notices of distraint by HMRC, please read ‘Notice of Distraint issued by HMRC‘.
As soon as they have entered your commercial premises, HMRC debt collectors can seize items to repay the outstanding debt, including costs. Notably, items removed have a lower value, usually as sold at a public auction.
Before uplifting items, the enforcement officers will attend your commercial premises to list items to seize as security as part of the Controlled Goods Agreement. Signing the agreement allows you seven days to raise funds to repay the debt plus costs. Refusing to do so prompts the bailiff to remove goods immediately. Once you sign a Controlled Goods Agreement, the goods remain under the control of the agent. Therefore, you may not sell or remove them. Doing so is a criminal offence.
Can Enforcement Officers remove items that belong to you personally?
An incorporated limited company in England and Wales is a legally separate entity. Therefore, the company’s finances are distinct, meaning assets owned by the directors, like cars, investments in their individual names, and homes. Remain protected. If the assets are in the limited company’s name, then they remain assets of the company and will be sold by a liquidator if the company fails.
If goods are removed and sold, do not cover the amount due. Then the HMRC may issue a winding-up petition against the limited company.
- Effective April 2016 onwards, HMRC can recover tax liabilities of £1,000 or more from business bank accounts. They may only carry this out once they have held a meeting with the client beforehand and attempted to collect but fail to do so:
- To identify the taxpayer and affirm their debt.
- Explain the amount due and why the HMRC are chasing?
- Discuss options for repayment.
- Check if the taxpayer is ‘vulnerable’ debtors, and if so, provide support to aid settlement.
- Then, those not vulnerable, but have money to pay the tax debt, who refuse to pay, can then have money taken from their account. Thirty days is allowed to object to HMRC’s decision, and it is a condition that the taxpayer has £5,000 left in the account.
Failure to pay National Insurance contributions (NICs) can be recovered using a personal liability notice issued by HMRC. However, an officer of the HMRC must believe that payment withheld is fraudulent or negligent by an officer of the company or any person party to and in a position of authority compliant in non-payment.
Therefore, recovery of unpaid NICs from a company officer is dealt with by issuing a Personal Liability Notice (PLN).
Personal Liability Notices Teams are authorised to issue such notices. PLNs are only issued when they are enforceable.
Tax Tribunals hear appeals against PLNs.
PLN’s are issued when companies have been blatantly negligent, not paying over National Insurance Contributions deducted from employees’ pay.
Owing tax to HMRC is severe enough under regular terms. However, suppose you, as a director, withhold any form of taxation, especially VAT, with the intent to defraud the crown. Then you are exposed to fines, imprisonment, as it is a criminal offence. Delaying paying your tax bill, being late paying your VAT, failing to be vat registered is dealt with by fines and other financial ways. Fraud, though, is taken seriously, especially with VAT.
Validation orders authorise the distribution of property following a winding-up or bankruptcy petition.
UK banks view the date advertised as being the date of the petition. That being the case, the advertisement allows banks to be aware of any winding up petition. Therefore, they immediately ‘freeze’ the company’s bank accounts; as they are concerned, the liquidator may claim losses incurred.
However, the short-term effect of this on the debtor means they lose the ability to trade.
A validation order lets a company continue trading. It also makes possible the sale of an asset or assets to benefit all the companies creditors. Effects of an order may vary, specific or to using, say, employees. A validation order can be open, validating transactions up to the winding-up petition is resolved, if at all.
You require the services of experienced lawyers to draft the order and then submit it on your behalf.
The information required needs to be robust and factual, with substantive legal argument. Application requirements need to be supported by substantial evidence and persuasive admissible evidence.
- You are following an application to the Court and
- Following a hearing of that application.
The Registrar does not administer a validation order application at the time of the hearing, as stated on the winding-up petition you have received. You are required to seek a further hearing before the Judge in Court.
The Judge, however, requires satisfaction that the evidence is credible and the company is not insolvent. The company must also demonstrate the ability to satisfy its debts as and when they are due. Further, your order must, if unsecured, not be in prejudice to other creditors if so.
- Company number, its trading and registered office address;
- A brief outline of your company’s journey;
- The company’s nominal and paid-up capital;
- Do you admit or dispute the petition:
- A summary outlining how the company received notification of the winding-up petition;
- Up to date financial position, ensuring detailed notes and previous management accounts.
- If disputed, why? Details;
- A credible, realistic, professional cash flow forecast and profit and loss projection covering the period the order sought;
- Details of the dispositions or payments in respect of which an order was sought;
- Reasons used in support of the dispositions or payments made;
- Any other information in support for consideration of the Court;
If an urgent application? To ensure payments allow the company to keep trading, then if compiling evidence may be lengthy, a Court can offer limited relief for a limited set time. There needs to be evidence to satisfy the Court that creditors’ interests are not prejudiced.
The order requires a sale of a property. The Court requires property details, along with a valuation, if possible, to confirm the true value and not at undervalue affecting other creditors.
During these difficult trading times, companies are finding it difficult to control cash flow. Therefore, paying has become a problem. VAT, however, remains the tax the HMRC is demanding on collecting. HMRC charge surcharges for late payment (Outside the Coronavirus Pandemic).
The numbers of defaults determine surcharges.
If you have been late paying the HMRC more than twice in a year, then a surcharge over will apply.
The outstanding sum your company owes. Then include surcharges calculated as a percentage.
For the latest information on surcharges during the COVID19 Pandemic, view the HMRC VAT site for up to date information.
When in the shoes of a petitioning creditor, consider factors relating to the purpose of the order and the history of the previous payment trail.
HMRC’s response may depend on the reason for the order and the trading trend before.
They can oppose an application.
Consult a commercial solicitor?
Validation orders are technically a minefield and require expert knowledge.
HM Revenue and Customs have considerable means at their disposal to recover tax remaining unpaid. Therefore, it’s essential to ensure that they are a priority.
It is worth mentioning that HBG Advisory deals solely with corporate debt, not income tax arrears. We can, though, provide support individually through Individual Voluntary Arrangement (IVA).
For help on Directors Redundancy, view REDUNDANCY.
The Team at HBG Advisory