One of the Government’s big initiatives last November was the launching of a facility enabling taxpayers to enter into a payment plan facility so that businesses and individuals could pay all forms of taxes over time. This meant that the Government were showing their intention to work with businesses and individuals to get through the current and future hard economic times together.
Whilst it may come as something of a surprise to many, HMRC are actually being quite sympathetic to businesses in relation to paying their tax liabilities. Statistics published by the HMRC in February indicated that over 60,000 businesses had contacted the HMRC to agree payment plans for over £1 billion under the Government’s initiative launched as part of last year’s pre budget speech.
The key point to note is dialogue. Providing businesses keep HMRC informed of their financial position, HMRC will usually agree to a deferred payment plan.
Brett Bennett from Dodd & Co Chartered Accountants said, “Our experience (and those of businesses that we have talked to) is that the HMRC are being very reasonable in relation to agreeing that tax liabilities can be paid at a later date, provided that a payment plan is strictly adhered to. If there are changes to a client’s circumstances, we have also found that the HMRC have been quite sympathetic and have provided some short term leniency. I think the HMRC have appreciated the circumstances where we have had to revisit the position for our client, and therefore have reaffirmed their position as wanting to work with clients”.
Deferred payment plans over a six month period are very common and 12 month plans have also been obtained for businesses and individuals. However, Dodd & Co’s experiences suggest there is a ceiling of £10,000 for PAYE / NIC and £100,000 for all other taxes, and if the tax to be deferred is above this then the issue is referred to the local office of the taxpayer. The consequences of this are that the business or individual has to provide financial information and cashflows to demonstrate that the financial hardship is genuine and that the client has a plan to trade out of it. This clearly requires more input when compared to the short telephone conversation that is all that is needed when the liability is under the above thresholds.
It is also important to note that being proactive with the HMRC and arranging payment plans prior to due dates will ensure that any penalties imposed for late payment are waived. However interest does continue to be due. The rate charged is somewhat competitive with the current banking environment and therefore the taxpayer is not being adversely punished for entering into such arrangements in terms of higher interest charges.
Brett Bennett also added, “In the majority of cases where a business fails, it is as a result of HMRC taking legal action (in relation to the collection of outstanding tax liabilities). This ultimately forces the business to go into liquidation/bankruptcy. It is crucial therefore that businesses and individuals do not simply ignore their tax liabilities if they want to protect their financial position and that of their business. “
Should you wish to discuss this matter further, please contact Brett Bennett.
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