Corporation Tax & VAT – What if I Can’t Pay HMRC?

Corporation tax and VAT are taxes which must regularly be paid to the treasury by companies in respect of either taxable profit made in the case of the former, or in the latter case, for VAT registered businesses, where the value of goods or services liable for VAT exceed the purchase of the same. Being unable to pay tax when due is one of the most common reasons for businesses to contact Insolvency Practitioners, but what can be done when the deadline for paying the treasury has passed? What if you can’t pay HMRC at all?

Does it matter if I can’t pay HMRC on time?

In a word, ‘yes’. If your business owes money it cannot pay then it is technically insolvent and a Director who allows their company to continue to trade while insolvent is already on dangerous ground. Especially so when you consider that HMRC has far more options that the average creditor when it comes to recovering debt and enforcing payment. If your business can’t pay HMRC, then you’ll need to act quickly as HMRC will certainly pursue money owed to them and it’s a point of fact that they are the most prolific petitioner of wind up orders, responsible for closing nearly as many companies via compulsory liquidation as everyone else put together.

One measure of insolvency is being unable to pay debts when they fall due. In order to continue trading, you’ll have to take action to stop this from applying to your company. This can either be done by securing the funds so you can pay company debts, or negotiating with creditors to get them to agree to postpone the due date or reduce the amount currently due to one which can be afforded. If you’re unable to secure funding, then you’re only option is to contact HMRC and try to agree an extension via a ‘time to pay arrangement‘. It has to be said, HMRC, while being largely sympathetic will put its own needs before your business’s and will assess whether allowing you more time to pay is likely to yield more tax than, for instance, moving even more quickly to recover money owed, which in practice is likely to lead to liquidation.

Recent Changes to Vat & Future Changes to Corporation Tax

The new ‘Making Tax Digital‘ regime has now begun for businesses registered for VAT and compels them to report their tax electronically as well as remit quarterly. For most businesses this is only a minor change as many already remit quarterly anyway, however not all do and being forced to make four payments a year rather than one large payment annually, could well have cashflow implications. While Corporation Tax isn’t currently subject to making tax digital and plans to expand the scheme to other forms of tax are currently on hold, there will come a point in the future when this too must be paid quarterly, which will need an adjustment by some companies, or they could find that they can’t pay HMRC when the time comes to do so.

My Business Can’t Pay HMRC, What Can I Do?

if you’re in a situation where your VAT and/or Corporation Tax is due or overdue, then you need to act quickly. In the first instance, contact us for a free consultation and we’ll advise you further. This could lead to us applying solutions which you may not have been aware of, or at the very least, will give you the reassurance that you’ve had the best advice, not to mention that having involved an Insolvency Practitioner will be looked upon favourably as an attempt to do the right thing should your company be liquidated.

If you find that you can’t pay HMRC, speak to us, we can help.