HM Revenue and Customs (HMRC) debts are ones that fall into debts relating to Income Tax, National Insurance or VAT arrears. It is important to remain on top of these bills and pay them as soon as possible otherwise you could find yourself in a bit of a difficult situation. You might end up wondering how to get HMRC debts written off.
These types of debts are known as high priority debts and HMRC will pass these debts onto private debt collection agencies for them to deal with.
There are a few simple ways to avoid accumulating these debts and reaching this point in the first place such as:
However, with many things that need to be considered, it is often quite easy to slip into a position whereby your HMRC debts are increasing at an alarming rate. The consequences of not regaining control and paying off these debts can be quite serious, including court action, bailiffs and, at worst, imprisonment. It is understandable that finding yourself in this position can be worrying but there are options to help you gain back control of these arrears.
Owning your own business comes with a lot of benefits. You can manage your own time, build your dream business from scratch and help people whilst potentially making more money than you would if you were working for someone else. On the other hand, there are a few extra considerations which much be addressed such as ensuring that business bills are all paid. For many business owners, January and April can be stressful months of the working because most business bills are due then.
It is relatively common for business owners to realise that they have a tax bill due for collection yet do not have enough money budgeted to pay for it. As mentioned, this is not uncommon and is encountered by many yet the most important thing to do is take action as soon as possible. If you have received a bill that you cannot pay it is important to contact HMRC immediately so you can come to an arrangement for payment. Whatever the case, do not delay in notifying HMRC and seeking help. There is a range of options available to help out business owners if they find themselves in this position, whatever their personal or financial situation, some of which are discussed later in this article.
If you choose to ignore the debts that you cannot pay and they are accumulating and do not contact HMRC to discuss payment arrangements, then HMRC will begin its own proceedings to recover the money owed. In worst case scenarios, the enforcement action they choose could end the activity of your business and close it permanently.
Initially, HMRC may add interest charges and late payment penalties to any bills that have not been paid; this is a clear warning that action is being taken. If you still cannot pay back the money, or HM Revenue and Customs have been unable to agree on a payment plan then it is very likely that you’ll be faced with an enforcement notice.
A Notice of Enforcement, originally titled a Distraint Order Notice, can be given to business from HMRC without the need for HMRC to go through court procedures to obtain one. After the notice is been issued, you have a choice of paying the debt in full or negotiating a Time to Pay arrangement. A Time to Pay arrangement does not reduce the amount you owe, but it does give you that extra time to pay it back in full and can be the best option for many businesses.
If all fails, and your debts still remain unpaid, Enforcement Officers will approach your business premises to take control of goods, whereby your goods will be removed from your possession and sold at a public auction. Take note that HMRC Enforcement Officers have the right to remove enough goods to cover the cost of the debt, as well as the cost of the enforcement procedures that have taken place.
As mentioned earlier in the article, there are many steps that can be taken to avoid reaching the point of a Notice of Enforcement. Taking that first step early on and notifying HMRC about your personal and financial situation and the fact you are currently not in the position not be able to pay back the debt is the most important move. After ensuring this is done, there are plenty of organisations that have been built to help you and provide you and your business with the best advice tailored to your individual circumstances.
Debt Advisors could recommend a variety of routes that will get you back on top of your debt and set you in a good position to manage future bills. Individual Voluntary Arrangements (IVA’s) could be a suitable solution but has to be agreed on by at least 75% of your creditors and HMRC has the option to vote against an IVA proposal if it has outstanding returns. Business Debtline, Citizens Advice and TaxAid are all organisations that can help provide more information about the debt solutions available to you and should be contacted at the earliest possible point.
Unfortunately, if your business is still trading whilst in financial trouble, it is unlikely that you can have HMRC debts written off. They will only write off debts where they are certain they cannot recover the money owed. If, for any reason, your business becomes insolvent, then the tax debt has a better chance of being written off, but your chances of setting up another business have diminished.
Insolvency practitioners can help you decide if this is the best route for you to negotiate your way out of debt. It is likely that an agreement can be made to spread those payments over a longer time period whilst the business continues trading.