PAYE Arrears is something to take seriously.
When you speak with HMRC about having problems paying PAYE, the level of faith they have in your company will largely be dictated by your tax history. If this is the first time that you’re having trouble paying PAYE, HMRC will react differently than if they were dealing with a company that has missed payments repeatedly.
We explain how to deal with PAYE arrears, the potential penalties, consequences, as well as the solutions we offer.
What happens if you cannot pay PAYE?
If you don’t have the money, your first concern is going to what happens next?
In the first instance, you will receive an automated letter reminding you to pay your PAYE debt. The letter will explain that you need to pay immediately and outline the ways you can do this.
Without good HMRC debt management, if the PAYE arrears continue, , HMRC will begin to escalate the situation. Initially, they will charge penalties for late payment. The amounts of these – detailed below – depending on how often you have defaulted.
If you simply cannot pay at all, your penalty liability will slowly grow tougher. Expect to receive increasingly threatening letters followed by legal action.
Ultimately, HMRC has the power to force your company into liquidation for non-payment for debt via something called a Winding-up Petition. HM and Revenue issue more of these per year than any other creditor.
The key thing to remember is that putting your head in the sand is the worst thing you can do. Whether you’re having cash flow issues, or even if the late PAYE is a symptom of more serious financial issues within your company, you need to keep in touch with them.
What is the Penalty for Late Payment of PAYE?
HMRC charge penalties from what they term ‘the penalty date’ which is generally the day after the due date.
The penalties are a percentage of the total amount that is late, and increase exponentially depending on the number of defaults in a tax year.
What are the options for paying PAYE arrears?
We have a great deal of experience helping small companies that cannot pay PAYE and have HMRC arrears issues.
As well as being experienced negotiators with HM and Revenue, we can advise you of the full range of options available for someone in your situation. With PAYE specifically, these include:
Time to Pay Arrangement (TTP) for PAYE
HMRC may accept a Time to Pay Arrangement, which is an agreed payment plan.
In order to qualify you will be expected to demonstrate that the company can afford to repay the PAYE over a maximum of 12 months, that you have proper compliance measures in place for tax payment management for all forthcoming tax deadlines.
Company Voluntary Arrangement
If other creditors are threatening, a Company Voluntary Arrangement (CVA) can offer a better solution than a Time to Pay Arrangement. You can delay tax and creditor payments for up to 5 years, and the debt itself can be discounted!
Although a CVA is considered an insolvency procedure it does not mean the company goes bust but is a rescue mechanism which can help a company get back on its feet. In the right circumstances, the CVA can be a formidable company rescue tool.
Personally liablity for PAYE arrears debts?
If the government suspects that you have deliberately, or intentionally failed to pay your statutory tax duties, they have the right to submit what is called a Personal Liability Notice (PLN).
As per Section 121C, Social Security Administration Act 1992, PLN’s give HMRC the power to hold company directors personally accountable in situations where there appears to be fraud or serious neglect.
Call us now for confidential expert help
If you’re feeling stressed and under pressure with PAYE debts, please call one of our confidential advisers for a free consultation. Over the last year, we’ve negotiated over £2,000,000 with HMRC. Call us on 0800 074 6757.