HMRC Time to Pay Arrangement for VAT and PAYE

What happens if we can't pay our VAT bill to HMRC on time? What can we do? There are a number of options that you can consider such as a debt management plan, time to pay arrangement or even a CVA if your business is viable but just behind on HMRC tax payments. Most importantly though you must act.

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What happens if we can't pay our VAT bill to HMRC on time? What can we do? There are a number of options that you can consider such as a debt management plan, time to pay arrangement or even a CVA if your business is viable but just behind on HMRC tax payments. Most importantly though you must act.

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Paying VAT late will result in a penalty, known as a "default". HMRC work hard to ensure every company pays its VAT and tax obligations on time because the money belongs to the taxpayer. Continually failing to pay VAT on time can lead to legal action, for example, a winding up petition issued by HMRC. The petition is advertised publicly and in the worst-case scenario could force the company into liquidation. What are the consequences if I miss a VAT deadline? If your company turns over more than £150k and misses its first VAT payment deadline, you will be sent a ‘Surcharge Liability Notice’. If your company fails to pay on time for the next 12 months, HMRC will impose penalties depending on the VAT amount.If your company has a turnover of less than £150k, HMRC will send you a reminder letter about paying VAT on time. If you miss another payment deadline within the next 12 months, you will then be sent the Surcharge Liability Notice and be put into the penalty process.If the company defaults, HMRC will notify you of any surcharges. A surcharge is a percentage of the tax that has been paid late. Have you been issued a penalty for late payment? This is of course, something you wish to avoid. However, if you do become subject to a penalty, there are different categories for your fine to fall in to. Ultimately, it depends on the amount of times you have fallen behind on your payments and the company turnover. See the table below:Number of Late Payments Penalty for companies with turnover up to £150,000 Penalty of companies with turnover in excess of £150,000One None NoneTwo None 2% of unpaid VAT (or £400 whichever is highest)Three 2% of unpaid VAT (or £400 whichever is highest) 5% of unpaid VAT (or £400 whichever is highest)Four 5% of unpaid VAT (or £400 whichever is highest) 10% of unpaid VATFive 10% of unpaid VAT 15% of unpaid VATSix+ 15% of unpaid VAT 15% of unpaid VATA daily interest rate of 2.75% will be charged on to the balance of any late payment, so be warned. Until you can pay off the debt, this will continue being charged. How can I prevent late VAT payments? There are several ways to prevent late payments from happening, or becoming a severe problem. If late payments are a recurring issue, cash flow and general financial management must be addressed. Conducting a business review or audit will help pinpoint cash flow problems.If your business is struggling, consider asking for a time to pay deal (TTP) with HMRC. This plan allows the company to repay the debt over a few months, or up to a year, in affordable instalments.  This could be referred to as a VAT debt management plan.Call us now on 0800 9700 539 for help with VAT payment problems. What are the available options for late VAT payments?Enter a VAT debt management plan or time to pay arrangement with HMRC Get a VAT loan but be careful this is not just putting off important decisions Propose a Company Voluntary ArrangementAs experts in turnaround and insolvency with over 20 years of giving advice we are able to spot the issues, set out a plan and guide you, if you need it. We are also licensed by the government to act as insolvency practitioners so we MUST give correct, proper and relevant advice.Can you re-finance the company or business? Is there a way to raise money from a bank loan or factoring company for example? Is it possible to replace that factor?Can you put personal funds into the company? Warning : make sure that the business is VIABLE in future before doing that.Ask for time to pay the debt or a TTP as we call it.  HMRC provides a "Business Payment Support Service" (BBPS). Using this service, all businesses with cash flow problems can request a Time to Pay arrangement with HMRC. You can call the HMRC's Payment Support Service  on Tel 0845 302 1435.HMRC will want to know why you are not on time with paying VAT. The collector will ask questions like:What are your plans? Why has the debt come about? Has a bad debt occurred? Have you spoken to the bank and asked for help there? Can you put money in?Depending on why you can't pay, how long you need to pay the arrears of VAT owed and your payment history - HMRC may allow you a few months to pay the debt off. Warning; usually all future tax debts (including corporation tax, PAYE and NIC) must be paid on time or the TTP will fail.If a TTP is not affordable then maybe a Company Voluntary Arrangement (CVA) is an optionWe can arrange a CVA or company voluntary arrangement. This will take the pressure off straight away! A CVA is simply the best way of restructuring a company's debts available and the good news is you stay in control of the company. See our VIDEO on CVAs here. The CVA option allows tax debts to be partially written off. It also allows you to cut costs, make redundancies and plan the turnaround of the company. Will that solve your problems?If a threat of a winding up petition is made by HMRC then an Administration or pre pack administration solution can be a great solution. Pre Pack administration is a powerful way to protect the business assets and sell them to a new company formed by you or a trade buyer for example. This will protect the company from aggressive legal action of HMRC like winding up.If the company is simply never going to be viable, then you should carefully consider creditors voluntary liquidation, this effectively closes the company down and may help protect the directors. Read more here on liquidation.If your business is constantly building up arrears of VAT this is a failure to comply with the law and also makes HMRC tax collectors think that the company is insolvent. So, you need to act properly and responsibly and deal with this serious threat to your company. Will I be personally liable for the VAT? Remember that if the company is insolvent, and if it goes into liquidation in future you could be personally liable for the debts, if you continue to trade, whilst doing nothing about the problems that it faces. If you KNOW the company is insolvent and you make the creditors' position worse, then in a future liquidation you can face personal liability for the debts you took on.Our advice is always to act quickly and carefully, get expert advice from us, keep notes of any discussions and decisions and always write down the names of people you speak to at HMRC. Finally, don't wait too long to get professional turnaround help. Call the HMRC debt experts on 0207 887 2667 or 0800 9700539 or email our advisors on help@ksagroup.co.uk

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If you are unable to pay your company's taxes on time, you have the option of negotiating a Time To Pay (TTP) Arrangement with HMRC. This is a plan that gives your company extra time to pay your tax liabilities. This type of plan also has the benefit of preventing further penalty charges from being applied to your outstanding tax amount.HMRC will allow you more time to pay your company's:Corporation tax VAT PAYETime to Pay arrangements are based on the realistic ability to pay, the company's stability and past payment history. Is a Time to Pay Arrangement right for you? If your business has tax arrears that have accrued due to cash flow shortages, you could benefit from a Time to Pay arrangement.You will only be considered for this if HMRC is confident you’ll be able to make sufficient repayments over the agreed period.HMRC will not consider you if you have:A history of late, overdue or incorrect tax returns Not adhered to previous arrangements A lack of financial information to support your request Overdrawn directors' accountsIf you are not confident negotiating a Time to Pay with HMRC, or your offer is rejected, seek expert company recovery advice. Consultants can help you explore other options such as administration, restructuring or voluntary liquidation. Negotiating a Time to Pay with HMRC There are two main scenarios that might lead you to negotiating a Time to Pay arrangement with HMRC:You become aware that you will be unable to pay a debt when it's due. You miss a payment date and receive a payment demand – e.g. a tax bill, or letter threatening you with legal action.In both cases, it's best to contact HMRC as soon as possible.Those that the first scenario applies to, should call the Business Payment Support Service.Those that the second scenario applies to, should call the HMRC department that sent the payment demand. 

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What is Corporation Tax? Corporation Tax is the tax companies are required to pay on their profits. The amount of tax to be paid, is calculated after they submit their accounts and depends on the amount of profit made. It is the directors’ responsibility to ensure all financial documents and accounts are accurate, so the appropriate amount of tax is charged.Within 9 months of the financial year end, a CT600 file needs to be sent to companies’ house. Failure to do this, can have consequences. If you are aware you cannot pay your tax bill call us today for expert advice on 07833 240 747 or 0800 9700539. What about if I pay late? What happens? Paying corporation tax late does not have penalties. What does have penalties, is filing your accounts late. Even if you cannot afford to pay the tax, accounts must be filed on time. If you cannot pay the complete amount in the time, then you can contact HMRC and arrangements can be made. For example, funding can be analysed or HMRC may agree to a Time to Pay deal.If you do not file your accounts by the required date, which is 9 months after the accounting period ends, the following penalties occur :1 day late - £100 penalty 3 months late - An additional £100 penalty 6 months late - 10% of the unpaid tax amount (as estimated by HMRC) 12 months late - A further 10% of any unpaid tax.For late payments, you will only be charged interest at the rate of 2.5% on top of the Bank Of England Base Rate, on the outstanding amounts due. However, if you are a company who pays your tax in monthly instalments rather than the bulk at once, and you deliberately pay the incorrect amount of your instalment, or pay it late, you may have penalties. See the website below to find out your penalties if this applies to you.https://www.gov.uk/guidance/corporation-tax-paying-in-instalments/penalties-on-instalment-paymentsIt should be known that If you fail to keep an adequate record in relation to the accounting periods, you risk being liable for a £3000 penalty fee. Can I go to court? No. You cannot go to court for late payments or late filing. All that HMRC want, is the tax to be paid. You will be issued letters demanding the payment. Your credit rating will not be affected. In the worst case scenario, HMRC have the authority to wind up your company, or seize your assets. It is very rare that the directors themselves will be personally liable.Contact us today for any further enquires. We are experienced in dealing with HMRC so can help you. What if I can't pay the Corporation Tax at all? If a company can't pay its debts, it's likely insolvent, but insolvency doesn’t always mean the end. Time to Pay Arrangement The company can negotiate to spread payments over time. Directors may get 6-12 months with HMRC, but insolvency practitioners can often secure 2 years or more with professionally prepared forecasts and statements for creditors. Company Voluntary Arrangement (CVA) A CVA is a formal, legally binding deal allowing an insolvent company to repay a portion of unsecured debts over 3-5 years. It requires 75% creditor approval. Though more complex than a time to pay arrangement, directors remain in control, and it can help the company survive. Administration or Liquidation These are terminal insolvency events, where the company ceases trading and assets are sold to repay creditors. Liquidation is preferable when the company has no future, protecting directors from wrongful trading accusations. Any Corporation Tax is written off.  

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What to do when you fall into VAT debt with HMRC. See how we can help you get a time to pay arrangement to pay back your arrears of VAT over a 2 year period.

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