Should you find yourself with HMRC tax arrears, it is imperative that you act quickly. Burying your head in the sand will do nothing but allow the situation to escalate out of your control, and possibly lead to action such as a winding up petition. You may be able to avoid all of this if you contact them first.
When it comes to HMRC tax arrears, it is likely that you have outstanding obligations with one of these three liabilities.
- Corporation Tax: This levy is paid on all taxable profits made by UK companies. When it comes to the calculations of a firm’s corporation tax, the onus is on the business to make sure all returns are accurate and filed/paid on time.
- Value Added Tax (VAT): A tax that must be paid by all businesses whose income exceeds the £83,000 VAT threshold. It is charged on the sale of all goods and services by UK businesses at a standard rate of 20% and must be paid quarterly
- Pay As You Earn (PAYE): The system used by HMRC to collect corporations Income Tax and National Insurance Contributions from a business’ employees. The employer must remove the required amount from workers’ wages and pay it directly to HMRC.
If you have started to build up HMRC tax arrears that you cannot afford, you should first of all ensure that you completely understand your financial situation and where the arrears stem from. Does the owed figure seem correct? Mistakes at the tax office are rare, but they do happen. If you feel that the amount owed is incorrect, it may be possible for you to dispute the debt. It is important that you take any necessary appeal action before you enter into any form of payment agreement with HMRC. The collection of the disputed debt should be postponed during the appeal process, to take the pressure off, albeit temporary.
Failure to settle HMRC tax arrears could lead to serious financial difficulties. If there is no appeal process underway, and no attempt to contact the tax office regarding the arrears to negotiate some form of payment plan, then HMRC are likely to take some form of enforcement action against you. This could be court bailiff action, or even liquidation that can result in the forced closure of your company.
Regardless of your situation, it is recommended that if you find yourself faced with HMRC tax arrears, you should contact an independent expert as soon as possible to ensure that you are protected, and make sure that you are dealing with your arrears in the best manner possible for the future of your business.