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HMRC debt management and VAT arrears

HM Revenue and Customs are not in the business of letting things slide. Unlike other creditors, if they determine you are in debt to them, then you are in debt to them and that is the end of the discussion. Once they have made that determination they act quickly to demand payment and, if you are unwise enough to ignore their demand, legal action is certain to follow.

If you have fallen behind in VAT payments you can rely on the fact that HMRC will be vigorous in their pursuit of this debt. Typically HMRC will issue a demand for payment that will provide a very tight repayment window. If you fail to respond or pay within that window assets can be seized and sold off to satisfy the debt.

However, asset seizure does not have to be the logical or inevitable consequence of VAT arrears. There are a number payment options that may be open to you. These additional options include Time to Pay arrangements wherein you are given the chance to satisfy the debt through a series of monthly payments. A Time to Pay arrangement is not a ‘right’ however. You will need to prove your company can repay the arrears in this fashion. If HMRC deems your business eligible, you will typically be given anywhere from 3 to 6 months to repay the debt. Should you miss or be late with any payments, however, they will rescind the agreement and renew an aggressive pursuit of the debt. Keep in mind too that Time to Pay is not available for insolvent companies.

If your company is unable to pay its VAT arrears and it is insolvent, you will need to speak to an insolvency practitioner without delay to discuss options. The insolvency practitioner will help you determine the best way forward to avoid forced liquidation.

How to deal with VAT arrears

Is your company beset by VAT payments it is unable to make? Has HMRC sent you a demand for payment notice? Could your HMRC arrears undermine future solvency? While VAT and PAYE arrears are not all that uncommon, they may nonetheless signify deeper underlying problems that need to be addressed and that could very easily trigger legal action by HMRC.

HMRC takes its mandate to collect VAT and other tax revenue seriously and have been redoubling their efforts recently to crack down on companies that have fallen into arrears. As such, numerous companies have received letters in the past year from HMRC demanding payment. If yours is one of these companies, you understand the stress this can cause.

Below we’ll look at some of the most common penalties that arise from failing to make VAT payment in a timely fashion.

Are you late with VAT payments?

Many companies have every intention of making their VAT payments on time, but circumstances intervene and they reroute those funds to fulfil what they consider a more pressing need. This type of behaviour, while understandable, is nonetheless a slippery slope.

While making the occasional late VAT payment is not likely to generate much more than a minor surcharge, HMRC is not so forgiving when it comes to chronic late payment or non-payment. With each subsequent late payment the VAT surcharge increases. Those increases are based on the size of your company’s VAT bill and the number of your late or missed payments.

If you develop the habit of making late payments HMRC is likely to send you a warning letter reminding you of your responsibilities. The full VAT surcharge table is available for viewing on the HMRC website. Besides having to pay ever more substantial surcharges for late VAT payments, you could be given additional penalties by HMRC for filing an inaccurate VAT return. Those penalties range anywhere from 15% to 100% of your total VAT bill.

If you fall seriously behind and completely miss a number of payments, you run the risk of HMRC initiating legal action against you that will likely result in asset seizure and sales to satisfy your outstanding debt.

Learn how to solve VAT problems

In the wake of the 2008 economic crisis many companies with previously spotless VAT payment histories required help managing their payments. This was true of PAYE and NIC payments as well. So you may take some solace in knowing that your situation is neither rare nor unique.

In fact, HMRC is one of the most common business creditors in the nation with tens of thousands of companies grappling with VAT payment issues every year. This does not, however, mean that HMRC are anything less than energetic when it comes to pursuing VAT monies it has determined it is owed.

If your company is having difficulty making its VAT payments, contact TruSolv. We’ve worked with scores of UK companies who needed help managing their VAT payment issues and we can do the same for you.

Contact us today to find out more about the various ways we can help you put your VAT payment issues behind you.

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You may think the difficulties you are experiencing are unique, but they’re not. We’ve helped scores of companies in similar situations return to a posture of stability and growth. You are not alone.

Call 0808 196 8676 today. We’ll help you sort things out and get back on the road to long term sustainability.

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