Beware HMRC collections will be returning to normal SOON.Posted: Sep 21, 2021

As you will appreciate, during the pandemic HMRC has been very busy dealing with the various support schemes, furlough, and self-employed support schemes to name but a few and have offered support lines to help people with payment plans for outstanding taxes.

However, on 30 June, HMRC published a policy paper headed ‘Collecting tax debts as we emerge from Coronavirus’ which received very little press or attention.

So, let’s start with the good news: it states that HMRC’s message to customers is simple ‘if you can pay your taxes then you should do so – but if you’re struggling, we want to work with you to agree a plan based on your financial position’.

However, it goes on to remind us that ‘it is vital that HMRC continues its debt collection work, not only to bring in money that funds public services like schools and the NHS, but also to support economic recovery and growth.’

It also goes on to say they will do everything to help businesses with temporary cash flow issues to survive as the economy grows, but where businesses have little chance of recovery, they do have a responsibility to act – not least to protect competitors and viable businesses in their supply chain and it is in no one’s interests to simply allow unsustainable debt to build up unchecked.

Finally, the policy statement seems clear that after the end of September 2021 normal debt collection processes will return.

Having spent 30 years working with Companies in trouble we have seen this in the past, for example after the 2008 banking crisis, HMRC took the same approach only to return to their normal ways a couple of years later and in my experience, they can be even more aggressive as the demand for collections from the treasury increases.

To make matters worse given the change in legislation in December 2020, now that HMRC are preferential creditors in an insolvency, they are likely to push even harder knowing they will be top of the queue for payment if the business fails.

OK so, what should Companies or Individuals do if they have HMRC Arrears?

The following are steps that we recommend

·        First if you think you will have problems paying HMRC, contact them as early as possible, not just when they start chasing you.

·        The first option is to ask HMRC for a time-to-pay arrangement. Further details can be found at the following site: https://www.gov.uk/guidance/find-out-how-to-pay-a-debt-to-hmrc-with-a-time-to-pay-arrangement.

·        The important aspects are that you need to understand what you can afford to pay before you pick up the phone.

·        You should remember that HMRC will expect you to pay future taxes as and when they fall due, so you will need to factor this into your ability to offer a repayment plan.

·        Normally the maximum period that HMRC will accept for a plan is 12 months.

Sometimes it may be difficult to agree a time-to-pay arrangement with HMRC and so we do offer a service to assist you with agreeing on a payment plan. Often the fact that an Insolvency Practitioner is involved shows that the director and Company has taken professional advice and the position is serious.

If you feel that a longer payment period may be required, you may need to look at a Company Voluntary Arrangement (CVA). This can last between 3 and 5 years but does include all creditors.

We are happy to discuss this with you further and offer a free 20-minute initial call to discuss your problems.