William Cullen, Manager at Dunedin Advisory, explores the options available if you are under pressure from HMRC.
Just over 958,000 people failed to lodge their tax return before the deadline of 31st January this year. The reasons may vary but HMRC’s response does not. Every individual and company has a responsibility to keep up to date with their tax returns and payments. When these fall behind HMRC will be in touch.
If you or your business are under pressure from HMRC what should you do?
It’s important to deal with matters as soon as you become aware of the problem. Too often individuals or businesses seek advice after a legal petition has already been lodged at court and the case is due to be called in a matter of days.
The sooner you seek advice, more options will be available to you and the chances of a successful outcome possible. Advice from your accountant or a qualified insolvency practitioner is the first step.
Speak with HMRC
Don’t be afraid to speak with HMRC regarding your financial position, particularly when it’s a short-term issue that can be rectified. Unfortunately, ignoring matters only leads to HMRC issuing further letters, calls and potential visits by their field officers. This is of no benefit to you or your business.
Continue to complete your returns
You should keep your tax affairs up to date and ensure that any returns due are submitted even if you can’t afford to pay the liability. By completing returns, you avoid the possibility of HMRC overestimating them and you know exactly what is owed.
This also avoids late filing penalties being incurred and increased amounts owed.
If demand letters from HMRC are affecting your health don’t be afraid to inform them. They have a health questionnaire which can be completed to inform them of your current health issues. Although this will not stop HMRC pursuing debts owed, it may provide you with some additional time or support to get your affairs up to date.
Time to Pay Arrangement
This is a formal agreement with HMRC which allows additional time to pay your tax bill, generally up to one year in respect of current arrears. For historic debt arising, unexpected debt due to an error in your submission or a change in legislation allowing HMRC to back date tax due, you can be given extended time to pay over a few years, with each case considered on its own merits. This arrangement requires complete honesty with HMRC regarding your financial circumstances and ability to repay the outstanding debt.
It is important to note that you are expected to maintain other ongoing tax liabilities, like VAT for example, whilst making agreed payments under the arrangement. Failure to adhere to your ‘time to pay’ arrangement means HMRC may not agree any future time to pay arrangement or take further action against you.
Improve your cash Flow
Consider ways to improve your cashflow so that funds are available to pay HMRC.
How can we help
If you are facing pressure from HMRC, we can help by talking you through the options available to you. We can negotiate on your behalf for time to pay arrangements or agree reduced settlements where these are appropriate.