Can I negotiate with HMRC?

How to enter into negotiations for unpaid tax with HMRC

If a limited company is unable to pay its tax bills to HMRC, there may be a possibility of entering into negotiations in order to arrange an affordable repayment plan.

If you know you are going to be unable to pay HMRC by the due date, you should contact them as soon as possible and make them aware of the situation. You may be surprised by how accommodating HMRC are if you are pro-active and willing to enter into negotiations to clear your tax debts rather than burying your head in the sand and ignoring the problem.

Understanding tax debt negotiations with HMRC

When negotiating with HMRC most companies will be looking to enter into a formal repayment plan known as a Time to Pay Arrangement.

As the name suggests, a Time to Pay Arrangement gives you longer to pay your outstanding tax bills through a series of affordable monthly instalments. HMRC are not obligated to offer every company a Time to Pay, and your likely success in securing this type of arrangement will depend on a number of factors including the amount of tax arrears your company has built up, along with your previous payment history with HMRC.

What information do I need to supply when negotiating with HMRC?

When negotiating with HMRC you will be required to supply certain information about your company including its assets, financial position, and future viability. You will also be asked about the reasons behind your inability to pay, what you have done to try and raise the money to pay your tax bill, and what you will do in order to get the company’s tax affairs back on track.

The negotiations with HMRC will involve you submitting an income and expenditure form, detailing the incomings and outgoings of the company, broken down into a number of areas including wages and salaries, mortgages and rental payments, and any other regular spending.

You will also be asked to provide details of any cash at bank as well as any company assets that could be used to reduce your total debt.

How much extra time can I negotiate with HMRC?

HMRC treats every company and every instance of non-payment of tax as an individual case. Therefore, there is no one size fits all policy when it comes to HMRC negotiations.

As a general rule, HMRC has a preference for Time to Pay arrangements to be completed within 12 months, however, longer periods can be negotiated depending on the situation and the level of tax debt involved.

The amount you will be required to pay HMRC towards your tax arrears will form part of the negotiation process, however, HMRC will do a calculation to work out your company’s disposable income and they would typically expect 75% of this to be put towards a Time to Pay arrangement.

This 75% disposable income figure ensures your company is paying off enough towards the debt to clear it in a timely manner, while also being low enough to make it sustainable throughout the duration of the Time to Pay arrangement.

What happens if negotiations with HMRC fail?

If your negotiations with HMRC fail, or you are unable to adhere to the agreed monthly repayments towards your tax debts, you may need to consider a formal insolvency process to resolve the situation. These can include:

• Company Voluntary Arrangement - A Company Voluntary Arrangement (CVA) is a formal repayment plan entered into by an insolvent company as a way to deal with a multitude of debts to a variety of creditors – including those owed to HMRC. CVAs are only suitable for viable companies who are able to demonstrate that they have a realistic chance of future success.
• Administration – Placing a company into administration can allow for a process of restructuring to be undertaken all while under the legal protection offered by a moratorium. Administration can involve the company being streamlined, refinanced, or even sold to a connected or unconnected third party.
• Liquidation - Unfortunately for some companies dealing with HMRC arrears along with escalating debt owed to other creditors, can take the business past the point of rescue. When debts have spiralled out of control, company liquidation may be the most appropriate option to protect creditors from further losses.

How can Real Business Rescue help with HMRC negotiations?

With a team of licensed insolvency practitioners, Real Business Rescue are perfectly placed to help you when negotiating with HMRC for unpaid tax bills. We can work alongside you to present your case to HMRC in the best possible light.

If negotiations are unsuccessful, we will be here to talk you through your alternative options including formal insolvency processes such as Administration and Liquidation. If you are struggling with rising HMRC debts, contact the Real Business Rescue team today.