Solutions for Tax Debt Problems
- HMRC are usually the largest creditor of an insolvent company
- Contacting your creditors in advance of a payment falling due that you know you can’t pay is a good initial step and immediately gives you more options with HMRC
- The most drastic action that can be taken by HMRC is by issuing a winding-up order
Common tax debt problems
When referring to tax debt within a company we are usually referring to outstanding PAYE, VAT, Corporation Tax and other statutory payments.
HMRC is typically the largest creditor within a company due to all of the tax payments that need to be made on behalf of the company, and these payments tend to take a back seat when a company starts to enter troubled waters.
This is principally due to the historically poor collection procedures used by HMRC. This position is changing as HMRC are outsourcing their debt collection more often.
Advice on how to handle tax debts with HMRC
Richard Simms; insolvency practitioner, discusses what to do if you have received a letter from HMRC requesting payment in full.
In our experience if you are having trouble keeping up with your payments to HMRC they tend to give flexibility to people who inform them of the problem prior to the debt falling due. If you contact HMRC at an early stage of your problem then they tend to give options regarding different payment methods and times.
By ignoring the payments and not seeking advice from your accountant, bookkeeper or Insolvency Practitioner, then you are setting yourself up for a tougher challenge. These professional people can help advise you on how to talk to HMRC and how to negotiate payment for the months you have missed. If you continue to ignore your payments and continue trading then this is where your role as a director will come into question should your company ever have to enter liquidation.
What steps can HMRC take for missed payments?
If you contact HMRC regarding missed payments and explain your situation, then they will be more amenable to helping you make the payments in a more manageable way. Contacting them prior to the due date will help tremendously.
If you continually miss your payments and make no attempt to contact HMRC then they may start to take legal action. This legal action can come in the form of either sending out a bailiff or a Winding-up Petition.
Use of their in-house team of bailiffs is also becoming more common.
How FA Simms & Partners can help
If we are contacted early on we can provide guidance and advice on how the company director can approach HMRC to discuss the missed payments and organise new payment conditions.
If you have already started to receive statutory notices of legal action being pursued against your company, then we can help put the company into a voluntary arrangement or worst case a voluntary liquidation which will be a more flexible process for than company then a court-led procedure and gives options to re-start the business.