What to do about HMRC arrears

HMRC Arrears

The reason HMRC arrears are so common is understandable. When a Company is under cashflow pressure and is left with the options of either not paying the staff wages key suppliers or not paying HMRC it seems the obvious choice to choose the latter option.

To make matters worse the chances are that, whilst you may get the odd call from HMRC or a computer-generated letter, there is a sort of lack of urgency about them. It’s also very easy to convince yourself that you will get back on top of HMRC, when things improve.

This is where the problems start. If you have areas with HMRC then our experience is that this is a key indicator that your Company may be insolvent.

The second point to make is that whilst it may be some time before HMRC takes action, they always will take action. They have a process, and they want to be paid, so they will follow that process up to and including winding up the Company.

The third issue is that Companies with long outstanding HMRC arrears of a considerable amount may lead to the directors being disqualified if the Company fails.

What to do if you have arrears with HMRC

I appreciate that these points are concerning but there is actually a lot you can do.

• First, if you think you will have problems paying HMRC, contact them as early as possible, not just when they start chasing you. Leaving it for them to come to you really doesn’t help.
• The first option is to ask HMRC for a time to pay arrangement. Further details can be found at the following site: https://www.gov.uk/guidance/find-out-how-to-pay-a-debt-to-hmrc-with-a-time-to-pay-arrangement.
• The important aspects are that you need to understand what you can afford to pay before you pick up the phone. It’s important to do your cash flow forecast and bring your accounts up to date before you call them.
• You should remember that HMRC will expect you to pay future taxes as and when they fall due, so you will need to factor this into your ability to offer a repayment plan.
• Normally the maximum period of time that HMRC will accept for a plan is 12 months.

Sometimes it may be difficult to arrange a time to pay arrangement with HMRC and so we do offer a service to assist you with agreeing on a payment plan. Often the fact that an Insolvency Practitioner is involved shows that the director and Company has taken professional advice and the position is serious.

If you feel that a longer payment may be required, you may need to look at a Company Voluntary Arrangement (CVA). This can last between 3 and 5 years but does include all creditors. Click here for more information.

If you are concern about HMRC arrears and insolvency, we are happy to discuss this with you further. Call us and lets’ talk. We offer a free 20 minute initial call to discuss your problems.