What Happens if you Can’t Pay Your Tax Bill?
If you can’t pay your HMRC tax bill and don’t take appropriate steps to either negotiate with HMRC or proceed to a voluntary arrangement, administration or liquidation, you should be prepared for HMRC to take some increasingly severe measures against your business..
If your business can’t pay HMRC it is very likely that it is insolvent. If this is the case, from the point of insolvency onwards, as a company director, you have a legal duty to protect creditors. This often means ceasing trading and liquidating your business. Failing to put creditors first leaves directors open to significant personal liabilities. Contact us to discuss how we can help.
The one thing you cannot do is put your head in the sand with HMRC, because that is the surest way to speed up the escalation.
What to do if you’re Struggling to pay Your Tax bill
If you have received HMRC threatening letters or other indications that enforcement may be imminent, we would strongly recommend you to contact one of our team for some confidential advice about your situation. We have a specialist HMRC team that can help in most cases.
Your options include negotiating time to pay, a Company Voluntary Arrangement (structured repayment plan with creditors) or putting the company into liquidation. There are actually many things an insolvency practitioner (IP) could do to help. IP’s are adept at business rescue as much as liquidation processes so there may be options you havent considered.
Ask HMRC for Time to Pay
Time to Pay Arrangements are structured payment plans allowing for monthly repayments of your tax arrears.
Read our full article on Time to Pay Agreements with HMRC
5 Options HMRC May Take if You Can’t Pay Your Tax Bill
(1) HMRC may Retain the Services of a Commercial Debt Collection Agency
HMRC currently uses the services of 13 large commercial debt collection agencies. These agencies may telephone you, send text messages, write letters or turn up at your premises.
If they do appear on your property, you should be informed that they have no legal right to enter your premises.
(2) Bailiffs
HMRC’s powers of distraint allow them to visit your premises and inventory your company’s assets.
Depending on the situation, these are then either carried away on the spot by the officer or left with you under what’s called a Controlled Goods Agreement. This is where you acknowledge that HMRC is now the legal owner of these goods, but are allowed to keep them on your property until HMRC sells them. This is usually within seven days of their visit.
If the goods are sold for more than you owe, you’ll be sent the remainder. If they don’t cover the debt, you will still have to pay the difference.
(3) Take Money Directly From Your Bank Account
Recent powers allow HMRC to enforce what they are calling ‘direct recovery of debts’ which means they can simply take it from your bank account.
They are legally entitled to send you a letter informing you of their intention to do this, and they must also have had a face to face meeting with you also.
The final requirement is that you should be left with no less than £5,000 in your account once the money has been deducted.
(4) Court Action
If HMRC opts to take you to court, you could be liable for court fees, and HMRC’s costs, in addition to your current tax bill.
(5) Compulsory Liquidation – When all else has failed, HMRC has the power to forcibly wind up your company. Be aware HMRC is unlike a privately owned company and does not need to obtain a County Court Judgement (CCJ) .
Get Free Advice on Dealing with Tax Debt
If you find yourself in this situation, we would recommend you take professional advice as soon as possible. Our advisors are fully licensed and regulated. We’ve helped 1000’s of company directors find their way through financial difficulty. Call us now on 0800 074 6757.
