If you can't pay your self-assessment bill to HMRC by January the 31st you should follow our advice and get...
We’re all probably still processing the recent budget in terms of how it affects us, our businesses and family lives, but I seem to have stuck at the new powers H M Revenue & Customs (“HMRC”) have been given.
HMRC to take money from your bank account
For those that haven’t got that far yet, HMRC have now been given the power to seize cash from bank accounts if you owe tax but are continually failing to pay. You must owe more than £1,000 and you must be left with at least £5,000 in your account. HMRC are yet to confirm how this system will operate and are working to ensure that adequate safeguards are in place, but one thing is for sure – you will have received numerous letters requesting payment before any funds are actually seized. They are not going to raid your account without first having tried to make contact with you. So, what’s the answer? The best advice is, don’t ignore the letters or demands you receive. If you can’t pay, speak to HMRC and tell them. See if you can come to a payment arrangement whereby you repay your liabilities over a set period or agree set monthly contributions. Despite the images we have of the taxman they are only human and will try to help within their guidelines. HMRC will be concentrating on people who have the means to pay, but are choosing not to, so you should speak to your local office as soon as you hit difficulties in maintaining payments to them. Your accountant will also be able to help you with this.
Could HMRC push your business into Insolvency?
I’ve spent a little while reading through reports and updates and one thing that concerns me is what if HMRC’s actions push you and/or your business into insolvency? What if they seize the cash that has been put to one side to pay your staff? If this happens, you should liaise with your accountant, but you should also consider discussing your situation with a Licensed Insolvency Practitioner who can advise you not only on insolvency, but options that are available to you in terms of recovery and continuing to trade. The earlier you seek advice, the more options there will be available to you. In some instances, it is inevitable that the actions of HMRC could tip a business into insolvency without the option of recovery and a formal insolvency procedure will follow. Again, it is imperative that you seek advice as soon as possible. Now for the technical discussion. A Company has been placed into a formal insolvency procedure either on a voluntary or compulsory basis due to the fact that HMRC seized cash, leaving the Company unable to pay its debts. Chances are the Company was already struggling to maintain liabilities given the demands being received from HMRC, but it was the sole action of having the cash seized that sealed the fate. Could HMRC be regarded as being a “super preferential creditor” in that they have been paid in advance of employees and other unsecured creditors? And would the Insolvency Practitioner have a legitimate claim for the repayment of funds seized for the benefit of creditors as a whole? It’s an interesting point, and one that we have debated at the office, but what are your views?