If a business has failed to pay their taxes on time, they may find themselves struggling with HMRC tax arrears (unpaid debts that are overdue). It’s not uncommon for businesses to find themselves struggling to pay their liabilities to HMRC. The good news is that there are steps businesses can take to prevent the situation from spiralling. However, HMRC tax arrears are a sign that the company is facing serious financial difficulty. HMRC tax arrears are likely to be a symptom of other financial difficulties such as:
- Cash flow problems
- Mounting debt to other creditors
- Overtrading
- Lack of accurate financial records
If this sounds like you, it’s important to seek professional guidance as soon as possible. This will enable you to take steps to avoid insolvency, or choose the best path for the business if the company has already become insolvent. HMRC tax arrears are likely to be just one symptom of financial difficulty and so the key is to act as soon as possible.
Communicate With HMRC
If you are struggling with HMRC tax arrears you should contact HMRC as soon as possible. Whether it’s VAT arrears, Corporation, PAYE or NIC taxes that you’re defaulting on, communicating is the best path forward. One of the options they may give you is to set up a repayment plan known as a Time To Pay Arrangement. This is a structured repayment plan that enables companies to repay their tax bills in instalments. HMRC Time To Pay arrangements typically last 12 months, however this will depend on the individual circumstances of the company.
In order to be eligible for a Time To Pay arrangement, HMRC will be looking for solid evidence that the company has the financial means to meet the agreed repayment deadlines, and is committed to doing so. You can apply for a Time To Pay arrangement if you:
- have filed your latest tax return
- owe less than £30,000
- are within 60 days of the payment deadline
- plan to pay your debt off within the next 12 months or less
If you cannot make your application online you can do so by calling the Self-Assessment Payment Helpline.
Seek Professional Guidance
When struggling with HMRC tax arrears you should contact HMRC, and also seek the guidance of a business rescue expert (licensed insolvency practitioner). They will advise you on how to manage liabilities like HMRC tax arrears, whilst advising on other areas of financial strain within the business. A business rescue expert will be able to look at the company holistically and advise on a coherent rescue plan that’s tailored to the company’s individual needs.
If you are concerned about HMRC tax arrears, or any other financial difficulties, please don’t hesitate to get in touch with the team at Ballard Business Recovery today.
