Written ByKeith Steven
Managing Director
Keith is the Managing Director of KSA Group Insolvency Practitioners which has been established for 25 years. The company has undertaken more CVA led rescues than any other firm. Read our case studies to see how.
PAYE refers to employee income tax and National Insurance contributions which companies, as employers, must pay to HMRC.
You must register for PAYE if any of the following applies to an employee in the current tax year (since 6 April):
Employers are to report PAYE information in real time, also known as, ‘real time information’.
It is due to be paid as follows:
If your employ people on more than You will need to submit quarterly returns. Remember it is your responsibility to do this as a director not your accountant. Yes, they can do it for you but ultimately compliance is your responsibility. If you haven’t filed a return then HMRC can make a reasonable assessment and chase you for it.
If your company can’t pay over the PAYE, then the company is probably insolvent! You must act to do something about this.
If your business or company has not paid the PAYE across to HMRC, then there is a strong possibility they will take action against the business. Basically, it’s tax payer’s money and the tax collectors are there to collect it. There are no grey areas, just black and white. After all, HMRC has heard every excuse and will know your company is in financial difficulty, or the tax would have already been paid.
When companies face cashflow crises, management is struggling to cope and failure is imminent, often the major creditor pressure is from one source – HMRC.
HMRC are a preferential creditor, often ranking ahead of the bank. This may well mean that lenders who have issued loans, that you have personally guaranteed, get less recovery. This risks exposing you financially.
Banks worry about the pressure that HMRC can bring to bear; bailiffs, distraints, winding up petitions. These can precipitate the failure of the company and bankers worry about their ability to control this. What happens if their client gets a winding up petition from HMRC?
There are some options for dealing with PAYE arrears, but many people don’t know where to start.
It is worth calling HMRC’s Business Payment support services telephone number on 0300 200 3835. It’s open from 8am to 8pm Monday to Friday, and from 8am till 4pm at weekends.
Options include:
Ask for time to pay the debt, or a TTP as we call it, if your company can’t pay the PAYE. HMRC provides a “Business Payment Support Service”. Using this service, all SMEs which have cashflow issues and good compliance, should be able to get a Time to Pay arrangement with HMRC. If you need help, call us or call the HMRC’s Payment Support Service on 0300 200 3835.
HMRC will want to know:
If you contact this service, you will need to explain why:
Ask us, KSA Group, to arrange a time to pay deal if your business can’t pay the PAYE. As licensed insolvency practitioners, we are very highly regarded by HMRC and deal with them in offices right across the country. We will need to know all of the above details and also do some financial forecasting work in order to establish what the company can afford to pay back and over what period. Call now for this expert service on 08009700539
Consider a company voluntary arrangement. This will take the pressure off straight away. We are the UK’s leading CVA experts with huge experience of arranging CVA deals with creditors, including HMRC. This allows non tax debts to be partially written off. It also allows your company to cut costs, make redundancies and plan a turnaround.
These very powerful techniques can help protect the business assets and sell them to new company or third party. This will protect the company from aggressive legal action by HMRC.
The first failure to pay on time does not count as a default.
| Number of defaults in a tax year | Penalty percentage applied to the amount that is late in the relevant tax month (ignoring the first late payment in the tax year) |
|---|---|
| 1 to 3 | 1% |
| 4 to 6 | 2% |
| 7 to 9 | 3% |
| 10 or more | 4% |
Daily interest will continue to build up on all unpaid amounts from the due and payable date to the date of payment.
In the event that you pay less than what is owed, you will be assessed a late payment penalty.
After six months, if you haven’t made your monthly or quarterly payment in full, you’ll be assessed an extra penalty equal to 5% of the outstanding balance.
If, after a full year, you still haven’t paid, there will be an additional 5% penalty.
Even if there is only one late payment during the tax year, these extra penalties still apply.
With both penalties in mind, if a Time to Pay Arrangement (TTP) is agreed upon with HMRC then this is treated the same way as a payment. The penalty clock will stop on the date of the TTP application. If the TTP terms are broken, full penalties will be charged and it will be as if the arrangement never existed.
KSA Group are experts at negotiating with HMRC. HMRC are “sophisticated creditors” in that they know all the procedures and rules. You therefore need professional advice to make sure of the best outcome to save your business and stop the bank closing it down.
Do not be tempted to borrow money from online lenders to pay a HMRC bill unless you are sure you can pay it back. These loans almost always have a personal guarantee requirement so you can become liable for the company’s debts!
If the company is insolvent, you could be personally liable for the debts if you continue to trade whilst doing nothing about the problems the company faces. Wrongful trading can be a real problem if ongoing tax arrears are building up and the company enters insolvent liquidation. Failure to pay PAYE could result in a personal liability notice from HMRC.
So, act carefully, keep notes of any decisions and always write down names of people you speak to at HMRC. Take advice from experts, and above all, act promptly as delay may just lead to more problems for you as directors. If you want to know more about wrongful trading, click here.
Don’t wait until legal actions have been taken against the company to ask for a Time to Pay deal with HMRC. It is better to ask for help BEFORE arrears build up.
Try to plan the cash flow of the business well in advance. You have a legal obligation to do this! If the directors do not think the company has sufficient cash to trade, they should consider the obligations and plan a way forward.
Don’t be too ambitious in planning repayment. Your company will have bad months as well as good, so be careful with the cash flow forecasts. Do you want a free cash flow model? Email keiths@ksagroup.co.uk for advice.
Ask for 12 months to pay back PAYE, knowing that you may get 6-12 months at most.
If your cash flow forecast says the company can be viable, but the business cannot afford a relatively fast repayment programme, then you must consider a company voluntary arrangement (CVA).
Has HMRC issued a winding up petition or threatened to petition against your company because you can’t pay PAYE? If so, get help now by calling our free helpline or see this page for more details on dealing with a winding up petition.
It is estimated that over 200,000 companies are on some form of payment plan and many are failing to keep up with them. Non-payment of this tax is a failure to comply with the tax legislation and also signifies publicly (loud and clear to HMRC) that the company is insolvent. So, you need to act properly and responsibly by dealing with this serious threat to your company. If your company needs urgent help – call us now for free on 08009700539 or email our advisors on help@ksagroup.co.uk. We can help with a time to pay deal or other turnaround options.
Don’t wait too long to get professional turnaround help. Call the experts on 0800 9700539
I Can’t Pay My VAT Bill – Will HMRC Give Me Time To Pay?
I Can’t Pay My VAT Bill – Will HMRC Give Me Time To Pay?
Late Payment Of VAT – What Are The Penalties
Late Payment Of VAT – What Are The Penalties
If You Can’t Pay Corporation Tax What Are The Penalties?
If You Can’t Pay Corporation Tax What Are The Penalties?
Penalties for late payment of PAYE and NIC
Penalties for late payment of PAYE and NIC
Negotiating a Time to Pay with HMRC
Negotiating a Time to Pay with HMRCCan HMRC take my house for failing to pay company debt?
Can HMRC take my house for failing to pay company debt?
Penalties For Late Filing Of Corporation Tax
Penalties For Late Filing Of Corporation Tax
What are PAYE Security Deposits?
What are PAYE Security Deposits?