How an HMRC Payment Plan Can Save Your Business

When tax bills become insurmountable, an HMRC payment plan is one of the most effective ways to ensure that your business can pay its tax debts. By splitting any tax debt into manageable payment instalments, companies are able to navigate large bills that would otherwise cripple the business.

Why doesn’t everybody use an HMRC payment plan?

They’re only available to those that are already in debt, and even then, HMRC aren’t keen on issuing them. After all, if you’ve struggled to pay your taxes this financial year, why wouldn’t you struggle when you have to pay it back alongside next year’s taxes too?

Of course, it may be that you experienced a tricky situation that made it particularly difficult last year, or that you expect your business to be stronger next year. Unfortunately, HMRC don’t always see things like that, and would rather some businesses fold than potentially accrue more debt by staying open.

That’s where a specialist service such as those offered by our HMRC Time to Pay Arrangement Negotiation Team can really help. We’ve managed to secure manageable payment plans for countless UK businesses, and enjoy strong relationships with HMRC.

But how exactly does an HMRC Time to Pay arrangement help struggling companies?

Benefits of an HMRC payment plan

Flexible and manageable payments

This is undoubtedly the main and most obvious benefit to an HMRC payment plan. Tax bills can catch many businesses unprepared, and the need to pay a large amount in one payment can blow a sizeable hole in a company’s cash reserves.

Turning that large debt into affordable monthly payments makes it a lot easier to pay off. Be careful though, HMRC is less likely to agree to a Time to Pay arrangement if you’ve already had to use one before.

Stop accruing debts

If a business is finding it difficult to pay their taxes, then carrying on without taking any action will only increase its amount of HMRC debt. Securing an HMRC Time to Pay arrangement allows companies to tackle debts right away and avoid late payment penalties.

Late payment penalties differ based on whether it is Corporation Tax or VAT that the business is behind on. There are also higher charges for those that repeatedly pay their taxes late.

Overdue VAT payments start from 2% interest on any amount owing after 15 days, to a daily 4% rate being charged to those who have already filed a late payment after 31 days.

Overdue Corporation Tax, meanwhile, charges a straight £100 after just one day late, with another £100 added after three months, 10% interest added after six months, and an additional 10% added after 12 months.

Avoids legal complications

As they’re understandably weary of companies building up more and more debt with them, HMRC are quick to take action once payments are overdue.

If payments don’t seem to be forthcoming, or the total debt has snowballed to a large amount, HMRC will start to petition that the offending business is wound up. Once such legal proceedings have been made against your company, it can be difficult to get back on track. An HMRC Time to Pay arrangement avoids this situation altogether (although not if payments are missed after negotiating a plan).

Implement growth plans

Paying a large tax bill in one go can create a serious dent in a company’s cash flow. As such, any growth strategies that had previously been planned often have to be shelved as focus is diverted onto how to pay the debt instead.

By using an HMRC payment plan for troublesome tax debts, businesses are not only able to resolve their tax burden, but also look forward to the future. It’s difficult to plan for the future when the company’s existence is threatened today. By securing a manageable payment plan though, thoughts can turn to how to improve the business.

Retain key staff

One of the most difficult things for an insolvent company to shed is its staff. On a personal level, it’s never pleasant to lay off workers, especially if you know they have families and other commitments. Looking at it from a business perspective, it’s difficult to replace the work that key staff contribute too.

If a business makes a number of workers redundant in an effort to cut costs and perhaps save the company, they also risk losing skilled staff that are difficult to replace. Spreading out the payments for a large tax bill in these circumstances then, can save the livelihoods of multiple people.

Protect your reputation

Building a business also involves the building of a reputation. Hopefully, that reputation will be one of professionalism and trustworthiness.

When businesses have to close or lay off staff, customers and suppliers may start to question how well the business is run. Of course, this is often unfair, but nevertheless, suppliers will wonder if your subsequent businesses are a safe bet to deal with, and clients will be nervous that the company disappears and leaves them without recourse.

An HMRC payment plan allows your business to continue trading and thus protects your business reputation. While there’s no shame at all in closing a company down (most entrepreneurs have done this before finding success with a later venture), some may feel self-conscious about their failure to keep the business alive.

A means to carry on trading

Put simply, an HMRC Time to Pay arrangement is often the difference between a company surviving or becoming insolvent.

Tax bills can be sizeable, and difficult to settle in one payment, so it’s no surprise that HMRC debt is one of the main reasons that UK businesses close. If you ever encounter a tax bill that threatens the existence of your business, remember that a Time to Pay arrangement can help.

Utilising the services of a specialist Time to Pay negotiation team such as our own makes it far more likely that your company will be accepted. Not only that, but our skilled negotiators can ensure that any payment plan is affordable enough for your business to adhere to.

Think your company might benefit from an HMRC Time to Pay arrangement?

We specialise in helping businesses to navigate difficult situations. Unwieldly tax debts are a common issue, and Forbes Burton’s specialist Time to Pay negotiation team have helped countless businesses to handle them.

As business rescue specialists, we’ll provide the best possible solution to any issues your company might be having. Call us on 0800 975 0380, or email [email protected] for a free consultation.