A director or owner of the business has to call to discuss payment with HMRC.
You will need to explain why you need to delay payment of your taxes, e.g. cancelled contracts, travel plans or staff absences.
Please make sure that all of your tax filings are up to date.
What payment plans HMRC agree to:
Every situation is different, and what HMRC agrees for you will depend on your current situation and your history with them. There are no rules to go by. HMRC may consider help with liabilities relating to Corporation Tax, VAT, PAYE, National Insurance, and Personal Income Tax.
The 'time to pay' arrangement isn't a contract - it's designed to be flexible and amended over time.
The information to have handy when calling HMRC:
Company registration number
Company telephone number
Company Unique Tax Reference – if discussing Corporation Tax
PAYE and accounts office reference numbers – if discussing PAYE
VAT registration number and the figure from box five of your latest VAT return filed (the return needs to have been filed) – if discussing VAT
Your personal National Insurance number UTR for income tax liabilities
Bank account details
Details of any previous payments missed
A few practical points:
If you have any indication that you won’t be able to stick to the agreed plan, please communicate with HMRC as they can renegotiate the dates and amounts
HMRC may insist on Direct Debit collections
HMRC is happy to process refunds for personal tax if it is evident that there won’t be a liability at the end of the tax year
Here are the usual questions HMRC like to ask and some reasons why:
What is the cause of the cash shortage? Usual answers would be as above or delayed payments from clients or bad debts, delayed receipt of a grant, etc.
What have you done to ensure this won’t happen again? It may be worth having a cash flow forecast drafted for the coming weeks.
Have you approached your bank or tried to obtain credit from other sources? HMRC wants to make sure that they are not being used as a free credit facility.
Have the directors been taking drawings/dividends from the company? HMRC would like to ensure they are not at the end of the payees’ list. They accept the fact that salaries and overheads are the priority, but not after drawings/dividends.
Are you up to date with all other taxes? If not, they will be looking to pass the call to debt management, who can agree on a plan for the whole debt.
What and when can you pay? Please be prepared to commit to some dates and amounts. Ideally, HMRC would like some of the debt to be paid within the deadline, as this increases their debt recovery chances and shows goodwill.
HMRC may ask company directors to put personal funds into the business, accept lending or extend credit. Be prepared for this.
What savings or investments do you have? If you have savings or assets HMRC will expect these to be used to reduce any personal income debt as much as possible.
Top Tip - If you can see the shortfall before the due date - try to make some payments beforehand to show willingness. They love this.
When dealing with HMRC, we find, usually, the nicer we are to them, the more willing they are to help.
Make a cup of tea and be prepared for a wait on hold, depending on the time of day. Try to avoid lunchtimes and early evenings.