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My company is struggling to pay the VAT, will HMRC help?

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My business is struggling to pay the VAT, will HMRC help?

Updated: 1st April 2020

As the owner and operator of a small pipe and tobacco shop located in the West End, our business has been steadily declining over the past year. There is only family working at the shop so wages are not a problem. Unfortunately, I have had trouble keeping up with some of my suppliers but they have agreed to give me time to catch up. It is the taxman I am worried about because my business is struggling to pay VAT, will HMRC help?


Answer

As a rule of thumb, you can count on the taxman to be contacting you quite quickly if you are in arrears on any of your taxes including PAYE Arrears. This is not limited to VAT but also PAYE and NIC as well. Since you aren’t having difficulties with salaries at the moment and your creditors have agreed to an informal arrangement, you may want to consider the Time to Pay programme set up by HMRC.

 
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However, there are a few points which need to be understood. There should be no doubt in your mind that you will be able to make your payments in time and in full when you seek to take advantage of this scheme. If you are late you may receive that dreaded pay up within 7 days letter – and HMRC means business here! Therefore, be realistic when you negotiate how much time you will have to catch up on those arrears and exactly how much you can pay. From experience, we have found that it is better to ‘err on the side of caution.’

Maybe the amount you owe is not that great and you can comfortably make instalments over a year or two. Unfortunately, HMRC will want to know that your business was viable in the past and that your tobacco shop is not insolvent. HM Revenue and Customs highly frowns upon businesses operating whilst insolvent. Furthermore, they will want to know that a business is expected to be viable in the future.

The other alternative is to contract the services of Insolvency Practitioners such as Real Business Rescue to establish a Company Voluntary Arrangement (CVA) with your creditors and HMRC. This way everything is legal following prescribed rules and regulations and once agreed upon, debt collectors cannot be pressurising at your door demanding payment other than the agreed upon amount.

We are happy to consult with you to help you better understand your options. The thing to remember is that there is no time to waste when you are late with taxes. Government is willing to work with you if you show that your intentions are honourable and that you do intend to pay.


Keith Tully

Partner

0800 644 6080
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