Self Assessment: Advice when you cannot pay the tax due

What happens when a director cannot afford to pay their personal Self Assessment tax bill?

As a company director you are required to complete a Self Assessment tax return, unless you are the director of a not-for-profit organisation from which you received no remuneration. This is alongside submitting your company accounts and a Self Assessment corporation tax return for the company.

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Your personal tax bill will be based on income from all sources, including any income received from the company – although if you pay tax and National Insurance via the company payroll, you will not be liable for further tax upon this income.

Your Self Assessment tax liability may also be calculated upon any benefits that you receive from the company (although again, if this is already paid via payroll this will not be duplicated) and if you are a higher rate taxpayer an extra percentage of tax (but not National Insurance) may be due from any dividends received.

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Options if you cannot pay your Self Assessment tax bill

Once you have received your Self Assessment tax calculation, issues can arise if you are unable to pay the amount due. In some cases it may be possible to enter into negotiations with HMRC to undertake a Time to Pay arrangement. These arrangements are negotiated on a case by case basis, but often comprise an agreed schedule of payments that will clear the debt over a set period of time, typically between six and 12 months; however under some exceptional circumstances this can be increased.

Time to Pay arrangements, however, are not a guaranteed solution to your tax debt issues and will only be granted on HMRC’s discretion. HMRC must believe that you have both the will and the means to make the payments, including for any other tax that may become due during the Time to Pay payment period. You must also be able to demonstrate a positive track record of managing your tax affairs well.

So what happens if you cannot negotiate with HMRC over your unpaid Self Assessment tax bill? If deemed necessary, HMRC can then take a number of enforcement actions including; collecting outstanding tax payments via your earnings or pension, engaging debt collection agencies to act on their behalf, authorising bailiffs to seize and sell assets, imposing court judgements against you or declaring you bankrupt.

But don’t panic; the most important consideration when confronted with a Self Assessment tax payment shortfall is to face the problem and to seek help. In any case where money may be owed to HMRC, it is advisable to engage the services of an experienced business rescue agency even if the tax bill refers to personal tax obligations.

Real Business Rescue has extensive experience in negotiating with HMRC to provide practical solutions to tax arrears. Entering into the fray alone can be baffling and overwhelming, whereas our expert team fully understands the issues at hand, knows the potential pitfalls and can expertly negotiate on your behalf.