Has your company failed to pay its taxes on time? If your company falls into tax arrears for PAYE or VAT, it could come under pressure from HMRC and face the possibility of being wound up.
HMRC is often swift in taking action against companies that fall behind on their taxes and rarely fail to take action.
While the threat of HMRC trying to wind up your company is undoubtedly serious, it doesn’t need to mean the end of your business. Like other creditors, it’s possible for your business to negotiate with HMRC to pay its tax arrears over time.
The most common arrangement with HMRC regarding tax arrears is a Time To Pay arrangement.
It’s important that your company pays its taxes on time. Failing to pay taxes due to inadequate cash flow is often the first step on the path towards a business becoming insolvent.
Since HMRC is such a common creditor of UK businesses, it can follow up on unpaid taxes quite aggressively. Companies that don’t pay their PAYE, VAT and other taxes on time are often on the receiving end of court action initiated by HMRC.
HMRC’s tax collection process typically begins with a warning letter. This warning will often give your company just seven days to pay its overdue taxes to avoid the threat of court action by HMRC.
It’s important to be aware that HMRC does not need to prove a debt in court to send your business a demand letter. If your business is notified of tax arrears by HMRC, it must take action to avoid being taken to court and potentially wound up.
Even if your company hasn’t yet received a letter from HMRC regarding its unpaid taxes, it’s important to take action. By acting early, you can work out a Time To Pay arrangement with HMRC that allows your company to pay its taxes gradually.
Failing to pay taxes can have serious consequences, including you being personally liable for your company’s debts. In certain circumstances, you could be found liable for your company’s debts to HMRC if you have acted improperly as its director.
HMRC issues approximately 60 per cent of UK winding up petitions, making it by far the nation’s biggest creditor. Statistics show that, in recent years, over 250,000 UK-based companies have some form of tax arrears with HMRC.
As your company’s director, you need to take immediate action in the even that your company becomes insolvent, including insolvency based on HMRC arrears. Failing to take action could result in you facing wrongful or fraudulent trading charges.
There is also a possibility that you could be held personally liable for some of the tax arrears owed by your company to HMRC in the event that you failed to live up to the director’s responsibilities after realising your company was insolvent.
If your business receives a demand letter from HMRC about its tax debts, you must take action immediately. If you’re uncertain of what to do, contact us immediately to learn more about the options available to your business.
The options available for your business depend on its solvency. If your company is still solvent but can’t pay its tax debts due to cash flow issues, there is a possibility for it to enter into a Time To Pay arrangement with HMRC to pay off its tax arrears.
The Time To Pay plan is a long-term payment plan that allows companies struggling with insufficient cash flow to pay their tax arrears to HMRC over time. Since the tax arrears are paid off gradually, their impact on cash flow is less significant.
HMRC will only provide the Time To Pay option to companies that have a financially viable future. If your company misses one of its payments, HMRC will send a second demand letter and potentially take court action against your company.
If your company is insolvent, it cannot enter into a Time To Pay arrangement. For an insolvent company, several options are available to prevent against court action by HMRC, including entering administration or raising emergency capital.
If your company has tax arrears, it’s important that you take immediate action to prevent it from being targeted by HMRC for court action. Do not wait until you get sent a demand letter – take action early to maximise your company’s options.
We’ve assisted hundreds of UK companies with tax arrears and can provide help, assistance and results for your company. Contact us now to learn more about the options available to your company to sort out its tax arrears with HMRC.