Tag: PAYE Arrears

HMRC Taking a Tougher Line on Debt Recovery

Post author By Tony Groom
Post date February 25, 2011
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Evidence is emerging that HM Revenue and Customs is adopting a tougher approach to PAYE, VAT and tax arrears and increasingly using its powers of distraint to take over control of the goods, stock and assets of businesses.
In one example this week, just two hours after K2 was appointed by a company in difficulties, HM Revenue and Customs (HMRC) officers appeared at the premises and levied distraint on all the company’s assets and stock. There are similar stories from other turnaround and restructuring professionals.
The issue of a distraint notice (a C204 notice, also called a distress or walking possession notice), under HMRC powers allows it to take control of everything seized and while it does not necessarily remove property at that point, it means that the company cannot continue trading and is effectively put out of business because it is prevented from using its stock and cannot either sell or give away anything that has been distrained. It normally has just five days to comply.
This walking possession is used rather like Winding Up Petitions (WUPs) when HMRC has exhausted attempts to communicate with the company. Most companies are shocked when HMRC follows through with the actual action because it appears to come as a surprise, but when they review their correspondence they should not have been.
If the company does not pay or come up with alternative proposals, HMRC or an appointed agent can then take everything away for sale.
This hardline change of tactics comes after figures, published end of January, showed that the HMRC rejection rate for Time to Pay (TTP) arrangements had climbed from 2.7% in 2009 to 5.8% in 2010.
TTP is a very real solution for companies that cannot pay. While for the last two years HMRC has supported government policy of providing a light touch approach to businesses in difficulty, it is responsible for collecting arrears and not for saving businesses.
If a company receives a notice of intention to either wind up or distrain it should not delay in seeking the services of insolvency or turnaround advisers.

Tags Business Doctor, Business Insolvency, Business Recovery, Business Rescue, Business Restructuring, Business Turnaround, company doctor, Company Turnaround, Distraint, HMRC, PAYE & VAT, PAYE and VAT, PAYE Arrears, Time to Pay, Turnaround, VAT Arrears, Walking Possession, Winding Up Petition

Cash Flow & Forecasting General HM Revenue & Customs, VAT & PAYE Insolvency Rescue, Restructuring & Recovery Turnaround

The Questions HM Revenue and Customs Asks to Assess a request for Time to Pay Arrears

Post author By Tony Groom
Post date January 12, 2011
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Recently uploaded guidelines for HM Revenue and Customs case officers dealing with requests from businesses in difficulty for time to pay arrears of VAT, PAYE or tax, reveal the detail of what questions will be asked before the request for a Time to Pay arrangement (TTP) can be considered.
Applicants must be able to show that they have tried to raise the money they owe by other means beforehand. Individuals, which includes sole traders and the self employed, may be asked to show that they have approached their bank or asked friends or family for a loan or that they cannot pay the debt via a credit card.
However, the advice to case officers also states that for individuals “it is unacceptable for us to insist that a customer has made every effort to secure a loan before agreeing TTP” because it would contravene Office of Fair Trading Debt Collection Guidelines.
Both individuals and larger businesses may also be asked whether they have any assets that can be easily converted into cash or any savings that they could use to settle the debt, even if early withdrawal might incur a payment penalty. This also applies to endowment or life insurance policies, although the HMRC cannot insist that these are cashed to pay a debt.
The HMRC distinguishes between debts below £100,000 and debts above that amount and for larger businesses HMRC would want to see evidence, usually a letter from the bank, that the company has approached their bank and discussed borrowing facilities beforehand as well as exploring options for raising money from: shareholders, Directors, book debt factoring and invoice discounting, stock finance, sale and leaseback of assets or venture capital providers.
The case officer will also consider the applicant’s previous history of paying on time, whether they have had a previous TTP and previous difficulties will weigh heavily in the final decision and whether the business is viable.
It would make sense, therefore, to have a thorough business review and the support of a rescue adviser or insolvency practitioner to assess the business viability and explore all these options and to document them before approaching HMRC.

General HM Revenue & Customs, VAT & PAYE Insolvency Rescue, Restructuring & Recovery Turnaround

HMRC’s Assessment Criteria for a Time to Pay Arrangement for Revenue Arrears

Post author By Tony Groom
Post date January 7, 2011
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As businesses face continued tough trading conditions in 2011 a new series of guidelines has appeared on the HM Customs and Revenue (HMRC) website on the arrangements for paying arrears of tax, VAT and PAYE, known as Time to Pay (TTP).
Although the guidelines are aimed at those working in the revenue they are equally useful for businesses in difficulties in outlining the questions and conditions businesses will need to be prepared for if they are in arrears with revenue payments and looking for a manageable way to spread the repayments.
Firstly, in all cases the repayment period to be set will be as short as possible and usually no more than a year unless there are “exceptional circumstances”. However long the arrangement, interest will be charged while the debt remains outstanding.
There is no entitlement for a business to be granted a TTP. HMRC officers must consider the timescale being requested by the “customer”, their previous payment history and the amount outstanding.
Businesses must meet two further conditions and they are that the applicant must have the means to make the agreed payments as well as the means to pay other tax liabilities that become due during the TTP period.
Finally, the guidelines make it clear that the preferred method of dealing with TTP requests is by telephone, because it allows for detailed questioning of the viability of the business, and as part of the assessment of whether the situation is a “can’t” or a “won’t” pay.
The amount of detailed information that will be requested from the applicant will vary according to the level of the debt, divided into three categories, for debts below £100,000, from £100,000 to £1 million and for more than £1 million.
Whatever the level of arrears, for a successful TTP to be achieved any business in difficulty is strongly advised to be honest with itself and its advisers about all its outstanding debts and liabilities if it is to be able to stick to any TTP arrangement.
It is crucial that before the telephone conversation the applicant has all the required information on income and expenditure prepared and ready so that they can remain calm throughout what can be a stressful situation.

Tags Business Doctor, Business Insolvency, Business Recovery, Business Rescue, Business Restructuring, Business Turnaround, Financial Difficulties, HM Revenue and Customs, HMRC, Insolvency, PAYE & VAT, PAYE and VAT, PAYE Arrears, Time to Pay, VAT Arrears, viable business

General HM Revenue & Customs, VAT & PAYE Rescue, Restructuring & Recovery Turnaround

Dealing with VAT Arrears and PAYE Arrears

Post author By Tony Groom
Post date September 1, 2010
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Owing HMRC (Her Majesty’s Revenue & Customs) more than £150,000 for overdue VAT and PAYE when your turnover is less than £3 million is not uncommon in 2010.
The leniency of HMRC, whose light touch approach to collecting Revenue arrears since the recession began has helped the cash flow of many companies, has also made it easier for them to accrue both VAT and PAYE arrears. But the lack of a recovery has left companies in arrears burdened with debt they can’t easily repay.
Companies in this position have a number of options, but a real challenge is when to do something about it. If ignored, the liability can build up and the underlying business problems can escalate to a point where the company can find it more difficult to recover.
While directors are normally aware of the problems, and in particular of the liability in respect of Revenue arrears, they may not be aware of their options, assuming: “I know my business better than anyone else and if I don’t know the solution, then no one else will.”
Consider three financial solutions when dealing with HMRC arrears. They are immediate payment, a Time to Pay (TTP) arrangement or a Company Voluntary Arrangement (CVA). However, all too often one of these is implemented without considering other issues that perhaps need to be addressed at the same time.
The build up of PAYE arrears and VAT arrears is an indicator that the business is no longer profitable or that it doesn’t have sufficient working capital. The underlying issues can be identified by a business review and preparation of forecasts. It is obvious that an unprofitable company cannot achieve a payment plan while also covering ongoing payments. Less obvious is the restructuring and reorganisation that may be needed to achieve a viable business, one that is profitable with adequate working capital and positive cash flow.
Surviving the pressure of PAYE and VAT arrears generally involves more than just fixing the financial problem. the underlying issues need to be identified and workable solutions put in place.

Tags Business Doctor, Business Insolvency, Business Recovery, Business Rescue, Business Restructuring, Business Turnaround, company doctor, Company Insolvency, Company Recovery, Company Rescue, Company Restructuring, Company Turnaround, HM Revenue and Customs, HMRC, PAYE Arrears, Time to Pay, VAT Arrears

County Court, Legal & Litigation General HM Revenue & Customs, VAT & PAYE Insolvency Personal Guarantees Rescue, Restructuring & Recovery Turnaround Winding Up Petitions

Guide to Winding Up Petitions (WUP) and How to Deal With Them

Post author By Tony Groom
Post date January 10, 2010
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A Winding Up Petition is a legal application to the High Court or another appropriate court by a creditor asking that a company be closed down.
If granted by the court, the official receiver is appointed to oversee closing down the company and may then engage a licensed insolvency practitioner as approved liquidator.
The purpose of winding up a company is generally to remove control of a company from its directors so that its affairs can be dealt with properly. At the end of the process the company is dissolved and ceases to exist.
The petition must be properly served on the company, normally by personal delivery at its registered office and also it must be advertised in the London Gazette. The advertisement is intended to notify the public but in practice this is normally how banks and other institutional creditors learn of the petition.
Directors, on receipt of the petition, should be aware that the company’s bank account is likely to be frozen when the bank learns about it. They should also be aware that any further trading after the date of receipt may mean that they can be held personally liable for any company debts accrued after that date if, when their actions are investigated, they are found not to have acted in the best interests of the company’s creditors.
If the directors wish to continue trading in order to save the company then they should seek help from a business rescue adviser if the company is insolvent. If they believe that trading on as a managed workout would benefit creditors through recovering assets, then they should seek help from an insolvency practitioner who might well be introduced by the bank or another secured creditor.
Although the petition is very serious and should not be ignored it does not mean that the company is doomed to closure. With proper representation based on a credible plan to deal with the company’s difficulties it is possible to have a winding up petition dismissed.
A WUP is often used as an action of last resort initiated out of frustration following attempts by a creditor to agree terms for repayment of money owed or after repeated attempts to contact the company have been ignored. HM Revenue and Customs (HMRC) regularly uses the petition when its repeated written reminders and requests for repayment of outstanding PAYE, VAT or tax have been ignored.