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There are thousands of businesses across the UK specialising in all sorts of services. The majority of these businesses manage their VAT comfortably, however, it is not uncommon for some businesses to encounter problems. It may be that they struggle to make the payments on time or they cannot make the payments at all. Either way, it is a stressful situation to be in and, unlike other creditors, HM Revenue and Customs (HMRC) have powerful ways to ensure that they retrieve the money back from you.
Delaying VAT payments to HMRC may come as a first choice over delaying payments to a supplier that your business may rely on, just so that your business can keep trading in the short term. However, they are quick to act and demand payment and ignoring their demand could just end in unnecessary legal action.
They are a vigorous creditor when they determine that you are in debt to them and they may issue a demand for payment which gives you a very restricted repayment window. If you still fail to pay, any assets you have that amount to the debt can be taken and sold at a public auction. You may be able to get VAT arrears IVA help if this is a solution you are eligible for. There is no reason that you should ever reach this point. There are many ways in which the problem can be managed but the first, and most important, step is to not make any delay in seeking for help.
Finding help for VAT arrears is very simple. There are many organisations that employ experienced advisors that are best educated to assess your financial and personal circumstance and recommend a solution to suit you.
They will firstly look at why these arrears may have occurred, taking into consideration whether or not you have registered your VAT, amongst other factors. Contacting these professional advisors as soon as possible will be good proof that you have acted accordingly as a director and sought help. Insolvency practitioners (IP) will look at your options which may include:
Depending on the chosen route, seeking assistance from an insolvency practitioner will allow you to take back control of your arrears and continue to run a viable business.
HMRC, although doing everything in their power to retrieve the debt, do provide some degree of assistance to companies in arrears. They may offer your company a Time to Pay arrangement or TTP, which are more likely to be offered to you if you contact HMRC as soon as you realise you cannot pay back the debt. A TTP arrangement does not mean that HMRC will reduce the debt owed, but they will agree on allowing the company to re-pay over a set period of time.
The period of time agreed upon may be anywhere between 3 to 6 months, however this may vary and, on some occasions, HMRC may allow the repayment to be spread over 12 months. Entering into a Time to Pay arrangement will freeze any further late payment penalties but interest will continue to be added to the overdue amount. It is your job to initiate an arrangement and HMRC request that negotiation should take place over a phone call, along with a submission of your repayment offer and copies of cash flow in writing.
The case needs to clearly state why you are having trouble paying the amount owed and how much you can afford to offer as a monthly payment. It is important to calculate the payments with honesty and not overstate the figure. If you are not honest about the figure, HMRC will be able to see this from your copies of cash flow and reject your application.
After speaking to an insolvency practitioner, it maybe that managing your VAT debt with an IVA is the best option for your present situation. This is a formal agreement between you and your creditors, giving you time so you can pay back debts over an agreed period, usually anywhere between 60-72 months. Your insolvency practitioner should help write an IVA proposal.
HMRC are the largest creditor in the UK and it is likely that a reasonable IVA proposal will be accepted by HMRC as long as you have made sure that all their requirements are considered within. However, their reaction really does depend on the amount that is owed to them.
In most cases, if the outstanding tax debt is less than £15,000 then they may choose not to vote on your proposal at all, leaving the decision to be made by the other creditors. Any higher than £15,000 and they are likely to assess your proposal in much more detail.
As highlighted earlier in this article, it is extremely important that HMRC is contacted as soon as you realise that you have arrears that cannot be paid. This shows that you are aware of the severity of your situation and are taking the correct steps to solve it, ultimately working in your favour.
The next step is to seek help from one of the many organisations that are best placed to assist with these issues. VAT arrears advice in the UK is easily accessible and it is often free to discuss options with an advisor before pursuing the best one.
Expert advice is necessary and, luckily, readily available. VAT arrears are one of the most common reasons for insolvency, yet there is never any reason that the problem should reach that point. There is no one single answer to solving VAT arrears as every ones personal and financial circumstances are different, hence why speaking to an advisor is extremely important.
They can look into your individual case in detail and advise you on the best action to take. Arrears advisors in the UK save hundreds of businesses from insolvency or liquidation per year by assisting with VAT arrears IVA help.
