HMRC support for Contractors during Pandemic?
Since March 2020, HMRC support for Contractors during Pandemic has been subject to the impact on businesses in the UK and throughout the World. The UK has now entered a second lockdown since November 5th 2020. HMRC have offered guidance only the dealing with PSC Directors who are experiencing difficulty making payments on time or if at all. Many may already be in a Voluntary Arrangement.
There has already been much debated regarding the Coronavirus COVID19 Pandemic. Support. Originally set initially up in March 2020, has therefore been extended to bolster incomes in the second lockdown. Examples being:
The UK Government added further robust support to businesses in the UK. Also, HMRC suspends the Wrongful Trading rules and enforcement actions. However, though not all, if considered evasion and, in particular, target those who abuse the coronavirus job retention scheme. Yet, further direction announced by HMRC, specific as to how it is handling outstanding taxes and action by the HMRC for individuals currently in a Voluntary Arrangement.
HMRC has announced the suspension of all insolvency action during the Coronavirus COVID19 Pandemic. Therefore, HMRC is not petitioning for bankruptcy and winding-up orders except if considered necessary, (EG. Criminal or fraudulent activity.)
HMRC also agreed then to granting businesses the opportunity to delay VAT amounts due within:
- March 20th 2020 and June 30th 2020 for periods then ending, February, March and April 2020, No interest or penalties are, therefore, accumulating.
For those individuals who owe a self-assessment payment on account deadline of July 31st 2020? HMRC approved an extension to January 31st 2021.
Furthermore, those who are unable to pay due to coronavirus, HMRC will discuss your particular concerns to examine:
- Agreeing to an instalment arrangement;
- postponing debt collection proceedings;
- dropping penalties and interest where you experienced problems communicating or paying HMRC promptly
Coronavirus HMRC helpline is 0800 024 1222 or check out Dealing with HMRC Debt.
Opening hours remain: Monday to Friday from 8 am to 4 pm. They are closed on Bank Holidays.
Further guidance, however, remains linking to how the Coronavirus COVID19 Pandemic affects contractors contemplating, or now in a Voluntary Arrangement.
What is a “Voluntary Arrangement”?
A Voluntary Arrangement:
Remains a legally binding contract between an individual, partnership or company and their creditors.
How does a Voluntary Arrangement work?
Where an individual or company burdened with debt remains unable to pay. Then approach a Licensed Insolvency Practitioner (IP) for assistance and eventually preparing a ‘proposal,’ for creditor approval. 75% of creditors required to support the proposal, accept it and commence its implementation.
Role of a Licensed Insolvency Practitioner in a Voluntary Arrangement?
Licensed Insolvency Practitioners (Without any responsibility for the reliability of the figures )support the individual or director in drafting a suitable ‘proposal document’. Then, the IP assumes the position of “NOMINEE” responsible for an independent review of the proposal.
Once a meeting has approved the proposal requiring 75% of creditors approval, then the IP is formally appointed as ‘Supervisor of the Voluntary Arrangement.’ Therefore, they manage the operation of the arrangement, ensuring the agreed payments for distribution to the creditors, are received.
Voluntary Arrangement Advantages?
For a Voluntary Arrangement to be approved. 75% of creditors are required to vote approval of a Voluntary Arrangement. Note: The terms of an approved arrangement binds all the creditors even if they failed to vote. Therefore, creditors may not take additional enforcement action on the individual or company in the approved agreement. Consequently, it enables the individual, partnership or company to work towards recovering their situation while protected over some time, usually by submitting payment using anticipated income or profits in the future.
Once a Voluntary Arrangement is approved, Those party to the agreements MUST strictly follow the terms.
Failing so may trigger the supervisor to commencing bankruptcy or a compulsory liquidation if a limited company, as per the terms outlined in the agreement.
However, if the arrangement fails? Everything falls back to the original position. IP’S though may apply variations with creditors approval.
Option when struggling with an existing Voluntary Arrangement?
- Ensure you communicate with your supervisor as soon as you are aware of your problem
- Usually, arrangements allow the appointed supervisor some discretion to delay payments,
- During the Coronavirus COVID19 Pandemic, please view HMRC Coronavirus Insolvency Guidance on the ICAEW site.
HMRC also agrees to a minimum three-month break from contributions may be offered to those affected by Coronavirus Covid19. Pandemic. Therefore HMRC supports anyone who has a VA, allowing a break from contributions transacted without having to gain approval from HMRC.
HMRC confirm any deferment of VAT as a breach of any terms of the arrangement requiring payment of liabilities as they come due.
What connection does this hold then for contractors?
During the current Pandemic, many contractors are unable to deal with debt as yet still outstanding.
While the bulk of PSCs has few creditors. They may consider:
Voluntary arrangements may allow additional time to repay when pitched against informal ones.
A Voluntary Arrangement can avoid bankruptcy. Important, especially if the individual is a company director as they may face disqualification.
Seek free insolvency advice for my company.
For further support, please contact HBG Advisory on 0800 612 5448 or Please arrange VIRTUAL meeting safe and private in the privacy of your home or workplace.