In an ideal world, every single business would be in a plum financial position.
We would never need to worry about not being able to pay the tax bill. Unfortunately, the world we live in is far from ideal, and things go awry more often than we’d like - especially in light of the 2020 coronavirus pandemic.
If you’re a business owner racked with worry because you’re not in a position to pay your tax bill this year, don’t fret too much. There is light at the end of the tunnel.
Just because your financial difficulties mean that you’re currently unable to pay your tax bill, that doesn’t necessarily mean that you’re going to make an enemy of Her Majesty’s Revenue & Customs.
They may seem a little scary, but if you are upfront and honest with them, and HMRC will understand. They even have a whole department to deal with companies experiencing issues paying their tax bills (The Business Payment Support Service).
With that in mind, here’s what you need to do if you can’t pay your corporation tax.
5 steps to take if you can’t pay your corporation tax:
1. Acknowledge the situation
If you happen to be in this scenario, your very first responsibility is to recognise it. Get your head out of the sand and be realistic about what’s happening in your business. The sooner you recognise that you or your business is struggling, the more options you will have available to you.
2. Contact HMRC
You then need to contact HMRC and speak to one of their advisors, honestly and candidly in order to reach an agreement and form a plan together.
Before you call them, be sure to have the following information to hand:
- Your business name and address
- All your HMRC reference numbers (including your 10-digit unique taxpayer reference and/or your VAT reference number)
- Your bank account details
- Your exact income
- The full amount of the tax bill you are unable to pay
- The reasons behind your struggle to pay (perhaps you’re still awaiting payment from a large customer or client, for example)
- Your full expenditure
- All details of your business assets (including savings and investments)
- Full details of everything you have done in order to try and raise the funds to pay the bill
- Exactly how much you're able to pay immediately and how long you will need in order to pay the outstanding amount in some sort of affordability plan
- Details on precisely what you’re doing and will do in order to get your corporation tax payments back on track for next year
HMRC will try and help you out. Ultimately, however, they will want what’s owed to them, so they will often propose overambitious payment plans with struggling companies that are typically hard to stick to when a company is facing financial concerns.
This is where the next step comes in:
3. Prepare your payment plan
You need to be prepared to propose your payment plan and present it to HMRC along with supporting evidence as to why your deal is the most sensible one for them to take.
In your payment projection, you will need to plan for all future tax bills that are due too. HMRC seek to avoid setting up multiple arrangements with people wherever possible. While they will listen to your payment plan suggestions, don’t expect them to necessarily agree to it.
It’s also worth bearing in mind that the advisor on the telephone might not be prepared to sift over your accounts with a fine-toothed comb; so you will need to be prepared to present your plan quickly and clearly.
4. If you consider that your business has run its course and is insolvent...
Then you will need to present records of all your year’s financial decisions, big or small. This is in order to demonstrate to HMRC that you have not been recklessly trading with no consideration of any increasing debt to the business - tax or otherwise.
Like we say, agreements can be reached, and plans can be laid out. But don’t forget - if part of the agreed plan involves moving the debt from the business to you, you may need to offer personal guarantees.
If that’s the case, you need to think long and hard about those kinds of assurances before making them.
5. If you can’t reach an agreement on an affordable payment plan with HMRC...
It's time to speak to our experts at McAlister & Co. Conversely, if the entire thing is causing you so much stress that you’re struggling to cope and you’d rather a professional deal with the whole process from the start, you can instruct us to handle your tax affairs immediately.
There is a chance that your situation may be a little on the complex side. Agreements with the tax office can’t always be reached. Sometimes it gets complicated and requires the kind of experience, relationships, knowledge and guile that only an insolvency expert like McAlister & Co can offer.
If things get out of your control - contact us. We’ll sort it all out for you with Her Majesty’s Revenue & Customs on your behalf.
But it doesn’t end there.
It is vital for the survival of your business and your personal wellbeing that you make provisions in order to ensure that a similar situation doesn’t happen again in the future. How? By planning.
This is something that we can help you with as well, starting with your free consultation and initial advice from our experienced insolvency practitioners.