HMRC Arrears Relief

Being in debt to HMRC can be a major problem for both people and companies. The pressure to pay off these bills, whether they are PAYE arrears, corporation tax, income tax, or VAT, can be tremendous. Nonetheless, there are a number of options that may be able to manage and possibly lessen them.  A consultation with an insolvency practitioner can help you get back in control.

What are my responsibilities with regards to HMRC VAT?

You have obligations as a business registered for VAT, such as charging VAT on your products or services, maintaining correct VAT records, and timely filing VAT reports. Any VAT owed to HMRC must be paid by the due date. Maintaining thorough documentation of all purchases and transactions will ensure the accuracy of your VAT returns and enable you to support them if subject to an inspection.

What happens if you owe money to HMRC?

If you owe HMRC money, you need to pay them by the due date. To enforce compliance and payment, HMRC is able to use a number of measures, such as issuing reminders, assessing and charging interest and penalties, and pursuing enforcement measures like taking “walking possession” of physical assets, pursuing a county court judgement and then enforcing it through bailiffs or issuing a winding up petition.

What if HMRC Notifies You of Arrears?

If you receive a notification from HMRC about arrears, carefully read the notice to ascertain the amount owed and the cause of the arrears. Examine your records to confirm that the claim is accurate.  If you disagree with the figures, get in touch with HMRC as quickly as possible to challenge the notice and submit your calculations and supporting evidence, if you think there has been a mistake.  If you accept the amount, get in touch with HMRC to talk about your payment options.

What are my options for dealing with HMRC Arrears?

There are several options are available for dealing with HMRC arrears:

• Immediate Payment: if possible, pay the arrears in full to avoid further interest and penalties.
• Payment Plan: You can negotiate a Time to Pay (“TTP”) arrangement with HMRC, allowing you to pay the debt in instalments over an agreed period, usually less than 12 months, whilst keeping the ongoing taxes up to date.  Ideally your proposals need to be supported with up to date statutory accounts, management accounts and forecasts.  We can assist you in these negotiations.
• Seek Advice: if neither of the above options are achievable then you may need a formal insolvency process such as a Company Voluntary Arrangement (“CVA”) to enable you to formally reschedule your HMRC debts, along with others, in a plan which could run for up to five years.

Can HMRC debt be written off?

HMRC does not write off debts outside of a formal insolvency process, in order to not set a precedent.  However, HMRC debt can legally be reduced in a formal insolvency procedure, such as an Individual Voluntary Arrangement (IVA), Partnership Voluntary Arrangement (PVA) or a Company Voluntary Arrangement (CVA).

How do I find the right help with my HMRC arrears?

Getting the correct assistance entails consulting with a knowledgeable expert used to negotiating with HMRC, usually an Insolvency Practitioner (“IP”). Seek out an IP with a good reputation and track record in helping businesses overcome debt problems and “right size” or reschedule their liabilities.

How long will HMRC give me to pay back taxes?

Typically, HMRC are reluctant to allow repayment of arrears under a Time to Pay (“TTP”) agreement to extend beyond 12 months apart from exceptional situations.  Usually a Company Voluntary Arrangement (“CVA”) is preferred by them for companies wishing to repay their arrears in full or in part over a number of years.

Can you be Held Personally Liable for HMRC Arrears?

Yes. HMRC have specific powers to make directors personally liable for certain PAYE and NI liabilities.  They can serve a personal liability notice on them which needs to be settled within 30 days. 

Similarly, HMRC can demand a bond from the company against its VAT liabilities and directors can become personally liable for the VAT liabilities once the bond has been demanded.  

More generally, directors can become personally liable for all company liabilities, including those to HMRC, under the wrongful trading provisions, if they continue trading once they should have known that the company was insolvent and had no reasonable prospect of repaying the liabilities that were being incurred. 

Sole traders and partners in a partnership (which is not a limited liability partnership “lllp”) have personal liability for all business debts, including HMRC debts.

How do I clear my HMRC debt?

To clear your HMRC debt, you should follow these steps:

1. Pay in Full: Settle the debt as soon as possible to avoid further interest and penalties.
2. Time to Pay Arrangement: Negotiate an instalment plan with HMRC.
3. Seek Professional Help: Consult an insolvency practitioner to explore options like IVAs or CVAs if you are unable to pay in full.

How long can HMRC pursue a debt?

A debt may be pursued by HMRC for a maximum of six years following the date of occurrence. If there is proof of fraud or intentional misrepresentation, this time frame may be extended. In circumstances of intentional tax evasion, this time may be extended for up to 20 years for certain tax types, including VAT and PAYE.

Does owing HMRC money affect credit score?

Since HMRC does not share data with credit reference agencies, having a debt to them has no direct impact on a company or individual’s credit rating.   However, if they take formal recovery action by way of a CCJ or the issuing of a winding up petition, this will become public knowledge and will then be picked up by the credit reference agencies and the credit rating reduced or removed.  Similarly, credit insurers may no longer provide insurance cover to suppliers.

How much can HMRC fine you?

The type of arrears will determine how much the HMRC fines are. Penalties for late payments are 5% of the unpaid tax at first, and they increase as time goes on. An extra 5% is added once it is 6 months late and another 5% once it is 12 months late.

Penalties for willful misconduct can be anything from 20% to 100% of the tax due.

Can HMRC see my bank account?

In the event that HMRC is looking into fraud or tax evasion, it has the power to access bank account details. HMRC may, in some cases, ask your bank for information immediately without getting your permission.

Do HMRC send bailiffs?

Yes, HMRC has the right to send bailiffs, or enforcement officers, to seize your assets if you don’t pay your tax arrears. Usually, when all other methods of debt collection have been exhausted, this is the last option. It’s critical to reply to HMRC’s correspondence and get guidance before things get out of hand.

 

For further information and impartial advice, feel free to give us a call on 0113 242 0808 or e-mail advice@chamberlain-co.co.uk