Pushing back tax payments to HM Revenue & Customs can easily spiral into a worse and worse situation and cause a state of panic for directors. The powers granted to HMRC allow them to send businesses payment notices without a County Court Judgement and with no means of disputation for the director, often providing only a week to respond and pay the outstanding debt. HMRC may also see a company’s behind-schedule tax payments as evidence that it is insolvent and issue a fast-acting winding-up petition, with 60% of all winding-up petitions in the UK being those issued by HMRC against businesses that have amassed tax arrears. This can be especially dangers for directors, as they could be held liable if they continue to trade despite being insolvent, or if they prioritise paying other creditors over HMRC as a short-term fix for cashflow problems. As such, it is crucial that directors keep on top of the situation by contacting HMRC as soon as they are faced with financial difficulty, as HMRC offers assistance to companies that have fallen behind on VAT and PAYE payments.
Time to Pay Arrangement
The first option to take note of is the Time to Pay (TTP) plan offered by HMRC to solvent companies, which will help alleviate short-term financial difficulties by spreading the cost of a business’ tax bill over a longer period of time, the idea being that this will give viable businesses time to improve cashflow so that they may resume meeting regular tax payments in the future. A healthy compliance record is recommended for this course of action, as HMRC will seek to establish the exact circumstances of a company’s current situation before agreeing to a TTP. As such, providing information such as projected sales figures, detailed financial forecasts and a plan for how the business will continue operations throughout its demanding situation are all valuable in providing a case for why your company is still viable and how it will use the breathing room granted by a TTP to get back on track. If HMRC agrees to a TTP arrangement, your business will still be expected to meet the due dates for its future payments and returns whilst repaying its arrears over time.
Company Voluntary Arrangement
Alternatively, contacting a licensed insolvency practitioner (IP) about administering a Company Voluntary Arrangement (CVA) is another possible course of action for dealing with tax arrears. Under a CVA, a company enters into a legally binding agreement with its creditors to pay them back over a fixed period. This provides numerous advantages, as a business will be able to continue trading with better cash flow, whilst also being protected from the risk of HMRC or other creditors pursuing legal action. In order for a CVA to be approved, 75% of creditors (by debt value) will have to vote in favour of the proposal. As such, like a TTP, HMRC will be more inclined to agree to a CVA if a business can provide a case as to why it is still viable with profit forecasts and an outline of how the company will restructure to ensure that entering into a CVA will yield a better outcome than going into liquidation.
If you wish to contact an expert insolvency provider regarding any of the above, call Voscap today on 020 7769 6831, or email team@voscap.co.uk, to speak to one of our business recovery specialists.
