If your business has tax problems, like arrears of PAYE and VAT then the company is probably insolvent! You must act to do something about these problems and this guide will show you how. See our guide to “Is our company Insolvent”.
Not paid the deductions of PAYE and NIC across to HM Revenue & Customs? Well, as you will now know that is something that they do not like! Basically, its tax payer’s money and the collectors are there to collect it, no grey areas, just black and white. Pay up on time or they will take action.
HMRC are getting more aggressive in early 2010 as over 250,000 companies are on some form of payment plan and many are failing to keep up with that time to pay plan. Many are seeing aggressive threats from HMRC.
Non payment of this tax is a failure to comply with the tax legislation and also signifies publicly (loud and clear to HMRC) that the company is insolvent. So, you need to act properly and responsibly and deal with this serious threat to your company.
Remember that if the company is insolvent you could be personally liable for the debts, if you continue to trade, whist doing nothing about the problems that it faces. Wrongful trading can be a real problem where ongoing tax arrears are building up and the company then enters insolvent liquidation.
So, act carefully, keep notes of any decisions and always write names of people you speak to at HMRC down. Take advice from experts, above all act promptly as delay may just lead to more problems for you as directors. If you want to know more about wrongful trading click here.
Once you have read more about the problem on our guide pages like Is our Company Insolvent?, Directors Do’s and Don’ts and Warning Signs? then the options you have available are:
1). Ask for time to pay the debt. In the current recession Gordon Brown and the Government have stated that all SME's with cashflow issues should be able to get a time to pay arrangement with HMRC: if you need help why not use our expert programme?
2). Or consider a company voluntary arrangement (click for guides to the best solution).
3). An administration solution may protect the company from aggressive legal action of HMRC.
4). Finally, can you introduce more money into the company to pay the tax debts?
Time to Pay Deal (Click to go to our Time to Pay Programme)
Some 210,000 companies had time to pay deals approved up to November 2009!
Trading out, visit this guide to how to deal informally with the problem. This can avoid formal approaches like Voluntary Liquidation, CVA, Compulsory Liquidation and Administration.
Don't wait until legal actions have been taken against the company to ask for a "time to pay" deal with HMRC.Its better to ask for help BEFORE arrears build up.
Try to plan the cashflow of the business well in advance - you have a legal obligation to do this! If the directors do not think the company has sufficient cash to trade they should consider the obligations and options and plan a way forward.
Don't be too ambitious in planning repayment; you will have bad months as well as good, so be careful with the cashflow forecasts. Want a free cashflow model? Email keiths@ksagroup.co.uk for advice
Worried about legal actions? go to that page for more details.
Ask for 18 months to pay back PAYE, knowing that you will may get 9-12 months at most.
Ask for 12 months for VAT and they may accept or offer 6 months.
If your cashflow forecast says the company can be viable, but the business cannot afford that fast a repayment programme, then you must consider a company voluntary arrangement - CVA.
I don't have a cashflow forecast - can you provide one?
Yes we use a 3 month "rolling cashflow" forecast model. You can get this free from our online shop, download it with all the hard programming work already done for you. All you have to do is insert the payments to creditors on the days you expect to pay, then insert when your customers or factoring company will pay you. The programme then tells you what your cash position is every day!
If your bank overdraft looks like being exceeded then you move payments along a few days. This gives you an at-a-glance cash position.
CVA, if the company is viable but insolvent, this is the most powerful way of dealing with a serious cashflow problem and tax arrears (which proves insolvency). HMRC supports well proposed CVA's, you do not have to pay back all of the debt and thirdly you remain in control.
Do Nothing!??? This is not an option as it will lead to: Bailiffs, Sheriffs, walking possession, distraint and more worry - see here for How to deal with Legal Actions
Has HMRC issued a winding up petition or threatened to petition? If so get help now by calling our free helpline or see this page for more details on dealing with a winding up petition.
Don't wait too long to get professional turnaround help. Call the experts on 01289 309431 or 0800 9700539
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