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It’s fair to say that the pandemic wrought havoc on many businesses. Some had to close their doors, temporarily or permanently. Staff were laid off or furloughed. Trade dropped or even stopped. Operating expenses have rose, thanks to the new Health & Safety rules. Little wonder that business tax debts are on the rise as firms struggle to pay bills for VAT, Corporation Tax and the like.

Traditionally, HMRC has been a keen pursuer of tax debts and related penalties. But since the pandemic struck, it’s fair to say that tax enforcement has been rather more ‘light touch’. While the taxman has aggressively pursued cases of furlough fraud, he’s been much more forgiving of struggling businesses – hence support that has included a VAT deferral scheme (now closed).

What next for enforcement of business tax debts?

While HMRC has not pursued business tax debts with its normal zeal, will this continue as the pandemic tapers off and things return to something that resembles ‘normal’?

In a recent letter to the Institute of Directors, Business Secretary Kwasi Kwarteng wrote that:

“HMRC will take a cautious approach to enforcement of debt owed to Government that will have accrued during this period.”

But before you breathe a big sigh of relief, it’s important to realise that enforcement will still happen. The key to avoiding it is to make sure HMRC knows of any problems you have with business tax debts – and to agree repayment plans.

As Kwasi Kwarteng added in his letter:

“HMRC enforcement during this critical period however, will be largely driven by a lack of engagement by companies with it, rather than just their inability to pay and that using insolvency to enforce payment will remain a last resort.”

How to avoid business tax debt enforcement 

Based on what the Business Secretary has written, struggling businesses should be able to avoid enforcement action – provided they engage with HMRC and come to a managed repayment arrangement.

But how do you do that?

The simplest way is to get in touch with HMRC as soon as you know you will have difficulties paying VAT, Corporation Tax or any other business taxes. If you do this promptly, you should be able to agree a ‘Time to Pay’ arrangement.

You can get in touch with HMRC via its Payment Support Service (PSS) on 0300 200 3835. This helpline is open between 8am and 6pm on weekdays (excluding bank holidays).

However, if you have already received a payment demand – whether it’s a tax bill or a letter threatening legal action – then you need to get in touch with the HMRC office that sent you the letter.

It’s also worth noting that, if you are a partner in a business partnership, nominated partners are allowed to negotiate Time to Pay arrangements on behalf of all partners.

It’s best to spot problems early 

If you are unsure whether or not you’ll be able to pay an upcoming tax bill, you need to get to grips with your accounts. If you are a THP client, we can help. Simply get in touch with your account manager and we’ll help you understand what your upcoming liabilities are likely to be – giving you the information you need to work out whether you can pay, or need to make an arrangement with HMRC.

Need further advice on any of the topics being discussed? Get in touch and see how we can help.

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    Avatar for Karen Jones
    About Karen Jones

    Having worked for one of the world’s largest accountancy firms, Karen Jones uses her tax knowledge and skills to help clients obtain substantial reductions to their tax liabilities.

    With an expanding portfolio of tax clients, Karen enjoys the variety her work brings her and particularly likes working with new businesses and people. With a growing number of tax clients, she frequently faces a variety of challenges and relishes the experience she gains as she solves them.

    Karen likes the THP ethos: “I like the way the team has a professional, but friendly and down-to-earth approach – it creates a productive atmosphere that benefits everyone.”

    Karen’s specialist skills:

    • Personal Taxation
    • Tax Efficient Planning
    • Trust Administration
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