It is a statutory requirement that all individuals and companies in the UK account for tax to Her Majesty’s Revenue and Customs (“HMRC”) in a timely and accurate fashion.
This in essence means is that all companies and businesses should ensure they stay in full communication with HMRC throughout their period of trading and existence, ensuring that all tax returns are prepared accurately, filed on time and paid in accordance with the correct tax liability for the company/business.
Problems arise where such levels of communication are not maintained and returns or payments are missed, and following which consecutive occurrences may lead to a pattern of behaviour resulting in one of the following scenarios:
- penalties, surcharges and interest;
- tax investigations;
- company insolvency;
- individual insolvency;
- claims by liquidators or administrators;
- director disqualification claims;
- claims by the registrar of companies;
- claims by HMRC.
If your company or business is facing difficulties, then it is important to ensure that you maintain communication with HMRC. When presented with silence, HMRC’s only option of recourse is to issue proceedings, which will usually result in the company being wound-up and/or your personal bankruptcy.
It may be that your business is facing a sticky patch, is searching for funding or is about to secure a new contract, pending which some breathing space is required. Whilst HMRC will not normally provide such breathing space, by keeping them aware of the challenges your business is facing they are less likely to proceed as quickly with enforcement of the outstanding tax liability, and will often work with you to find a repayment strategy (if realistic).
Need to continue filing returns
Even if your business or company is unable to meet tax liabilities, it is important to continue adhering to the statutory duties to file tax returns, particularly PAYE/NIC returns and VAT returns.
- if these returns are not filed, HMRC will then raise statutory assessments of what they think has become due (usually based on recent trading results) which may not be accurate and are often overstated;
- these assessments, whilst they may be overstated, are capable at law of supporting legal proceedings for enforcement of the tax liability, the most common of which is a winding-up or bankruptcy petition.
By continuing to file returns, even where trading is making payment difficult, you are able to mitigate the tax liability or ensure that you or your company are being pursued for the correct sums and this will also assist ongoing negotiations to repay this debt.
Benefits of negotiations
The benefit of negotiating with HMRC are far greater than most companies and businesses truly understand.
A company or business, particularly where represented by an experienced professional, can
- often agree instalment arrangements to pay arrears of tax via a time to pay agreement which is then capable of taking the pressure off whilst the company or business continue to focus on business survival and growth;
- significantly reduce VAT Security amounts sought in the notice of requirement, particularly where a director’s new company is a completely different business or where the trading income is considerably lower;
- assist with accelerated payment notices negotiations and result in much clearer information being presented to HMRC and a considerable reduction in the accelerated payment sought (whilst negotiations are ongoing in respect of the underlying tax liability).
At Francis Wilks & Jones we have extensive experience of negotiating time to pay agreements, VAT security demands and accelerated payment notices with HMRC and can also advise and assist with regard to all tax-related queries, including in respect of any post-insolvency director disqualification claims or claims arising from a breach of a director’s fiduciary duties.