Specialist Help with HMRC Tax Arrears Negotiations
From a company perspective, Her Majesty’s Revenue and Customs (HMRC) will often take the view that the directors should have planned for the unexpected and be more proactive when reviewing tax arrears.
The directors are responsible, and that’s the end of the matter. Now, to be fair to HMRC in some cases this may well be the case and technically, legally, of course, the ‘buck’ does stop with the director. How, though do you plan for the unexpected? By definition, you cannot plan for the unexpected, as it is – unexpected and not planned for.
Setting aside the tax is always the best plan. However, this assumes everything goes to plan. For example what if you are a managing director and leave the tax matters to a financial director who turns out to be inept due to false credentials? The argument goes the credentials should have been checked, but in these matters are often overlooked. In another reasonably common occurrence what if you left “all that kind of stuff to the accountant” and he commits fraud and steals the money?
The same points are raised that the director should have checked on the accountant and what he/she was up to, but we have to accept directors are people, and they make mistakes.
You may be able to think of many other scenarios, however, in reality, it will come down to how HMRC view these situations and what their response will be.
How long will I get to make the tax arrears payments?
First, let’s get the bad news out of the way if HMRC is owed tax arrears of even relatively small amounts they will want their tax arrears paid and promptly usually within a maximum of twelve months. HMRC cannot willingly ‘write tax arrears off’ or negotiate them down. The key word here is ‘willingly’.
There are however ways using insolvency laws, or straight forward negotiation skills to renegotiate HMRC payment terms and timescales even where a Time to Pay Arrangement has failed. HMRC will assess you and your company in its ability or willingness to pay. In HMRC terms they will look at your case simply as ‘can’t pay’ or ‘won’t pay’. Generally, if it is want to pay but can’t then, they will usually agree a time to pay arrangement so worth trying this yourself if you are confident to do so.
In some cases it may be, we can agree that it is in everyone’s interests, including HMRCs, to agree to close the company and in doing so, the tax is liquidated along with the company. This may result in the directors starting again with a new company without penalty from HMRC.
We have had a Winding up Petition served – can you still provide HMRC help?
In the vast majority of cases yes we can help with winding up petitions and statutory demands. To be clear, you cannot simply stop the Court Hearing, but we can sometimes negotiate with HMRC not to advertise the winding up petition for example. The advertising ‘window’ for the petition is seven days after being served with the petition and seven days before the Court Hearing date. The petition is not advertised in the local press but is advertised in the government’s insolvency register called the Gazette. Depending on where you will decide which Gazette the ‘petition’ will be advertised in:
- Scotland – Edinburgh Gazette
- Ireland – Belfast Gazette
- England – London Gazette
The relevance being that once the petition is advertised your other creditors may see the petition and can use the same petition and it may even be seen by your debtors aggravating the situation more so. They may withhold payment for example.
By not advertising the petition we obtain a breathing space to start negotiations with HMRC and obtain a successful conclusion.
By the way, there are many other tools HMRC has at its disposal such as:
HMRC is my only creditor as I paid everyone else off, does this matter?
Yes, it could go against the directors as HMRC may take the view that you have shown preference to other creditors. If this is proven then directors may be accused of wrongful trading and can be in some circumstances made personally liable. Be aware simply owing HMRC taxes can be used as evidence of wrongful trading.
If you are concerned about any of the issues raised so far why not call 08000 746 757 and we can put your mind at ease and provide an effective solution.
Does it matter which tax arrears I owe?
Technically it should not, but practically yes it very often does. HMRC will often take a longer term view on recovering Corporation Tax and likely to be less aggressive as opposed to VAT and PAYE where they will ‘normally’ take a completely different view. HMRC will take the view that VAT is their money and you are collecting it for them- so you are using their money to prop up your cash-flow; frankly, this is often the case. None payment of PAYE may be seen as using employees and HMRC’s money, and if the director continues to pay themselves, this can result in the director’s being made personally liable by the serving of a Personal Liability Notice (PLN).
There are surcharges added for the various taxes, and you can learn more here for PAYE surcharges and penalties calculations and VAT surcharges and penalties calculations and Corporation Tax penalties.
Of course, the circumstances surrounding the arrears will shape the way collection of tax arrears is pursued. For example, HMRC will have a file on the company and directors and, promises to pay tax arrears and any failures will be recorded. On the subject of HMRC tax arrears negotiations when negotiating with HMRC never over promise due to pressure. If you fail to deliver your HMRC tax arrears proposal, this will be viewed as an HMRC Time to Pay default and result in your case being handed across to the HMRC legal department for a winding up petition to be issued.
Does the amount of tax arrears I owe matter?
In practical terms the adage “if you cannot pay and owe the bank £1,000 you have a problem, owe them a million, and the bank has the problem” can sometimes help, but certainly not always. It is worth understanding the various departments within HMRC have differing roles and clearly collecting taxes is a priority. However, if HMRC takes the view it is in the public purses interest, or you have defaulted, or cannot be trusted then they will close your company without fail irrespective of how much tax is owed.
If HMRC has lost confidence in your company’s ability to pay they will issue a winding up petition. The most serious HMRC unit is based in Durrington Road, Worthing, West Sussex and any communication with the Debt Management Team (DMB) or threat from this team deserves a lot of respect. They have two functions- collect all the money or close your company. It is rare that they will negotiate outside of this remit unless the circumstances are exceptional. They do not make idle threats and will ask the legal team to issue a winding up petition no question.
The good news is even at this stage we have quite a lot of success with tax arrears negotiations provided we get involved soon enough – ideally within 3-5 days of the petition being served. We have an enviable record of successfully helping companies negotiate substantial tax arrears, and we are happy for you to speak to past clients if you need to.
If you had a profitable company but received a threat of winding up or HMRC has advised you to speak to an insolvency professional, call us immediately on 08000 746 757 or call Mike direct on 07912 344 394.
We have successfully negotiated over £1m in HMRC tax arrears negotiations in the last month* alone keeping 90 people in employment.
* Figures relate period 07-07-15 to 07-08-15.
Written by: Mike Smith