My business cannot afford to pay HMRC

Published: 9th June 2022

Cashflow advice for businesses with HMRC debts

HMRC operate a strict regime of tax payments and penalties, and always follow up quickly if a business doesn’t pay. If they believe the business is approaching insolvency, or that directors are deliberately avoiding payment, they could close it down swiftly.

That’s why it’s important to communicate openly if you think you won’t be able to make an upcoming tax payment. So once you’ve got in touch with HMRC what might they be able to offer?

HMRC Time to Pay (TTP) arrangement

The Time to Pay scheme run by HMRC can ease business cash flow by reducing the pressure on working capital. It typically provides 3‐6 months’ extra time to pay, but a longer time period may be negotiable in some instances.

A significant benefit of a TTP is that once it’s set up, no further late or missed payment penalties are applied for the debt(s) included in the arrangement, as long as the new payments are met without issue. It can considerably ease cash flow problems, and allows you to focus on running the company without the distraction of tax debts.

How to apply for a TTP

If you think a Time to Pay arrangement would help your company you’ll need to prepare a strong business case in its favour. This includes providing detailed cash and sales projections, an outline of the changes you’ll make to ensure the company can repay, and an explanation of why the business has been unable to pay its tax liabilities.

Being prepared to answer HMRC’s questions in detail, and knowing your numbers, is essential as it conveys your seriousness in repaying. As licensed professionals we can contact HMRC on your behalf, and present a strong business plan if appropriate.

Negotiating a Time to Pay arrangement

Even though HMRC will want you to repay as quickly as possible, it’s important to ensure that the repayments are affordable for the whole term. If you fail to make a repayment, HMRC could cancel the arrangement and present a winding up petition against the company.

This would result in business liquidation and permanent closure in a very short timeframe, with limited opportunities to rescue the situation. HMRC are involuntary creditors and act quickly to recover taxes, particularly those collected on their behalf by businesses.

What other support is available when you cannot pay HMRC?

If you aren’t eligible for a Time to Pay arrangement, or HMRC reject your TTP application, there may be other routes available to help you pay your tax arrears. Alternative funding could provide the cash your business needs, either in the form of a cash lump sum or regular cash injections each month.

Invoice finance, asset based funding, and merchant cash advances, are just three forms of finance that offer a flexible alternative to traditional bank funding. Begbies Traynor has connections with alternative financiers around the country, and can put you in touch with suitable lenders if this is an appropriate route to take in your circumstances.

Seek professional help quickly if you have tax arrears

Our specialist team can quickly assess your best options if you cannot afford to pay HMRC, and are available to negotiate with them if required. Obtaining professional input can be instrumental in accessing the Time to Pay scheme as it demonstrates that you take your company’s tax arrears seriously.

For more information on HMRC’s Time to Pay arrangement, or other potential avenues for your business, please contact our expert team. Begbies Traynor operates a nationwide network of offices so we can quickly provide the support you need.

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