Closing a Company with HMRC Debts
Over the past two years, UK businesses have faced significant challenges and many have fallen behind with HM Revenue and Customs (“HMRC”) payments.
Throughout the worst of the pandemic the Government was focused on shielding businesses and keeping people in work. HMRC was key to delivering on this, and paused much of its debt collection activities. However, this support has come to an end and we will see HMRC take action to collect unpaid liabilities.
If your company is one of many that is struggling to pay its tax or VAT you should take prompt action. If arrears are not addressed, interest and penalties will be added to the balance and could, if unresolved, result in the presentation of a winding up petition. So, what options are available for dealing with HMRC debt?
What is a Time to Pay Arrangement?
HMRC can work with your company to discuss affordable payment options, such as a payment plan commonly known as a ‘Time to Pay Arrangement’. In some cases HMRC may be able to defer payment on a short-term basis, allows the debt to be paid at a later date, and no further action will be taken to collect the tax debt until the agreed timeframe has lapsed.
Time to Pay Arrangements are dealt with on a case-by-case basis. HMRC will review what the business owes, what it can afford to pay, and how much time is needed to pay.
A Time to Pay Arrangement can cover all outstanding amounts, including accrued interest and penalties. They are usually agreed over a six or twelve-month period, but payment terms can be longer if there is a realistic prospect that the debt will be repaid. If your business needs a lengthy repayment term it is possible that a formal insolvency process may be appropriate.
What will HMRC want to know?
HMRC will want information about the company before any agreement is made.
They must be satisfied that the request is genuine and will consider various factors, including the company’s filing and payment history. Before you contact HMRC, consider:
- What liabilities are outstanding?
- When was payment for these liabilities due?
- How much can the business realistically afford to pay, and when?
Putting together repayment proposals can be daunting and you may wish to seek advice from a Licensed Insolvency Practitioner who can negotiate with HMRC on your behalf.
Company directors should also be aware that HMRC could refuse time to pay proposals for various reasons, such as failure to submit returns or failure to submit then in a timely manner; or simply that they do not consider the proposal is achievable. HMRC is also likely to take a stringent approach if a company has had a previous arrangement which was not adhered to.
Help from a Licensed Insolvency Practitioner
Keywood Group is a Licensed Insolvency Practice with offices in Birmingham and London. Our team is experienced in advising businesses on their options (whether formal or informal), and dealing with company closure. We provide transparent advice on the options available, and ensure that you fully understand the process.
Our Insolvency Practitioner is fully licensed and regulated by The Insolvency Practitioners Association. If you want further information, please contact us for a no obligation chat.