Categories
HM Revenue & Customs, VAT & PAYE Insolvency Rescue, Restructuring & Recovery

SMEs – don’t make a difficult situation worse by ignoring HMRC letters

ignoring HMRC lettersWhen SME owners know they are having cash flow problems and will not be able to pay VAT, PAYE, corporation or other tax bills the temptation is to ignore communications from HMRC.
This will only make the situation worse, especially because HMRC (HM Revenue and Customs) are becoming much more proactive with businesses whose payments are overdue, as we reported in September.
Even where a business knows it will be unable to pay, it is always better to let HMRC know, the earlier the better. HMRC is supportive of those who contact them early and a business may be able to negotiate a Time to Pay (TTP) arrangement which involves a payment plan for clearing the arrears.
One thing is certain, though, ignoring the situation will only escalate HMRC action and could, at worst, result in the business being closed down.

What action can you expect from HMRC if you don’t react?

There is a full list of the consequences of inaction on this Government website
In essence, HMRC has powers to collect the money you owe, either by taking possession of the business’ goods and selling them (called variously distraint, walking possession or seizure), or by using a debt collection agency, or by taking you to court to get judgment, or at worst by serving winding-up petition to close down your company.
If things get to this stage, it is also likely to compound your debt problem because there are fees that are charged for each process. It will cost you a fee of £75 for the issue of an enforcement notice, £235 or 7.5% of the main debt above £1,500 and £110, or 7.5% of any goods above £1,500 that are seized whether or not you subsequently pay or they are sold at auction.
If the business has not already asked for advice from a turnaround, restructuring or insolvency advisor it is imperative to do so now.  The advisor will be very familiar with the processes the business is now facing and will investigate the state of the business thoroughly to establish whether all or part of it is viable, will advise on the next steps and help you through any ensuing negotiations.  It is important to remember that a turnaround advisor is on your side.
You are likely to receive a letter from HMRC giving you notice their intention whether to enforce by distraint or issue a winding-up petition. This normally gives you just five days’ notice and the opportunity to communicate with HMRC before you receive a visit from an enforcement officer or the winding-up petition.
HMRC Enforcement officers have the power to seize and remove goods or take walking possession to control goods, rather like those of a High Court Sheriff with a writ. The enforcement officers have the right of peaceful entry and once on your premises may remove goods owned by the company. If there is no public access to your premises or if they are not invited in by you then they may apply to court for forced entry.
Any goods that are subject to a finance agreement, and therefore the business does not own them, cannot be removed but generally the company will have to produce finance or ownership paperwork to support claims that the goods are not owned and therefore cannot be removed.
One thing is certain, ignoring the situation is not an option

Categories
Cash Flow & Forecasting Finance HM Revenue & Customs, VAT & PAYE Turnaround

The basics of Time to Pay for businesses struggling to pay their taxes

negotiating Time to PayTime to Pay (TTP) is a scheme run by HM Revenue and Customs (HMRC) to help businesses struggling to pay their VAT, PAYE, corporation or other tax bills.
It was first introduced in 2008 after the global financial crisis as a measure to help businesses experiencing cash flow issues as a result of customers extending their invoice payment times.
Not every business is eligible for the scheme and the first step is for a business advisor to thoroughly review the business and to help prepare a realistic forecast that allows for the TTP payments.
This is because HMRC will want evidence that the business can keep to an agreed payment schedule as well as pay all future tax liabilities on time.
Once a business is aware that it cannot pay a tax liability, it ought to contact HMRC early, if only to ask for time to prepare a forecast.
When speaking with HMRC you should be a director and know your VAT or PAYE or 10-digit UTR reference number so they can identify you and your business.
Be prepared to answer questions when applying, including:
* the amount of all HMRC liabilities due and how much you want to reschedule;
* the reasons why you are unable to pay;
* what you’ve done to try to get the money to pay the bill;
* how much you can pay immediately and how long you may need to pay the rest;
* your bank account details.
You are also likely to be asked to give details of income and expenditure, assets, such as savings and investments and what actions you are taking to ensure you will pay future tax liabilities on time.
The level of detail a business will have to provide is dependent on the level of the debt – below £100,000, from £100,000 to £1 million and for more than £1 million.
HMRC will also consider whether the business is one that cannot pay, or one that will not pay. They do this by looking at your history of payments, both in the applying business, personally and other businesses you are involved with.
This guidance is largely based on that given to HMRC officers and is a useful insight into how they assess TTP proposals.
TTP arrangements, once agreed, usually involve making monthly payments by direct debit over a period of less than one year. While payments from a personal credit card have been demanded and taken in the past, they should no longer be demanded from 13 January 2018.
Essentially a TTP should be regarded as a last chance where any late payment of the agreed amounts or of future taxes is a default of the agreement and most likely will result in immediate enforcement by HMRC or a winding-up petition.

Categories
Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery Turnaround

Stressed? Doing nothing is not an option

K2 Blog December 10 2015 OstrichDepending on personality type, people react differently to stress and the feeling it brings of being overwhelmed.
However, being frozen with fear when a business is in difficulties is really not an option if its owners want the business to survive.
According to Jeff Bezos, founder of Amazon: “Stress comes from not taking action over something that you can have some control over.”
But often in a particularly fraught situation, when it feels like there is no time to think, it is difficult to recognise the signs of stress so the first step is to recognise the symptoms. The physical symptoms may be a stiffening of the neck, sweaty palms, lethargy, displacement behaviour or the stomach clenching. The other symptoms include inertia, fear, anxiety, worry, feeling out of control, avoidance, inability to make decisions, catastrophising to see the worst possible outcome, or simply doing trivial things to take the mind off the problem.
Once you have recognised the signs you can start to address the causes.  Part of this is to analyse the situation and to break it down into manageable chunks. The other part is to research the causes and get help.
It may help to rethink your attitude to the situation so that you see it as one where there is an opportunity to move forward.
That will lead to breaking down possible actions into small steps, such as making that phone call to HMRC, if the business is having problems paying bills on time, or sending an email or calling a late-paying customer.
It also means identifying those things in the situation that you cannot deal with alone and accepting that there is a need for expert help, or even just talking to someone trustworthy who can provide a different perspective.
Breaking a difficult situation into manageable tasks is a great stress reliever.
Doing nothing is not an option.