Changes in fortune have always affected businesses in different ways, positively and negatively. And the COVID-19 health pandemic has had an enormous impact on everybody. If you find yourself in the position that you can’t afford your tax bill, HMRC have procedures to help you. It’s accepted that both parties want to reconcile the bill and some leeway is built into procedures.
Contact HMRC sooner rather than later
Maybe you’ve already missed a payment. Or you know there’s not enough in your business to pay the next tax bill. Whatever your circumstances and whichever tax you owe, it is important to contact HMRC as a matter of urgency.
The longer you leave it, the more the situation will eventually cost you. For example, missing payments incur an automatic late fee and interest. The longer the payment is delayed, the more penalties you accumulate.
COVID-19 and self employed tax payments
As part of their COVID-19 survival strategy, the government has allowed self employed taxpayers to defer their July 2020 self assessment payment on account until 31st January 2021. This means that you still owe the tax but you will not receive any penalties for missing the July 2020 payment deadline and you must pay the amount by 31st January 2021. You don’t have to wait until then, you can pay it off when you’ve got it any time before this new deadline.
Other taxes, like VAT, Corporation Tax and employers’ PAYE, may also be a problem because of COVID-19. If you’re struggling with any other taxes, you need to get in touch with HMRC on 0800 024 1222. Just like everybody else, HMRC are working under social distancing restrictions. At the time of writing their previous availability is reduced to Monday to Friday, between 8am and 4pm.
HMRC Time To Pay arrangements
Time to Pay is HMRC’s name for their procedure to allow taxpayers to pay a tax bill in instalments. There are slightly different rules depending on the tax involved.
Self assessment time to pay
If you owe less than £10,000 on your Self Assessment tax bill you can set up a Time to Pay instalment plan online. You don’t have to call HMRC if you do this all online. If you can’t do it online, or you’ve already missed a payment deadline, you need to call the Self Assessment helpline on 0300 200 3822 between 8am and 4pm, Monday to Friday. An advisor will help you set up your instalment plan over the phone.
Other taxes
If you’re getting ahead of things and haven’t yet got a payment demand from HMRC, you need to call HMRC’s Payment Support Service on 0300 200 3835, between 8am and 4pm, Monday to Friday.
If you’ve already got a payment demand, including a letter discussing the possibility of legal action, you should get in touch with whichever department sent you that letter. The details will be on the letter.
It’s worth noting here that if you’re a nominated partner in a business partnership, you can sort out a Time to Pay arrangement for individual partners or the partnership as a whole.
How do I prepare for this phone call?
An excellent question. No one wants to make this call to HMRC. There are all kinds of emotions attached to our financial wellbeing. And, because they’re responsible for enforcing the regulations, it’s hard to believe HMRC are there to help you. But they are.
HMRC administer the tax system for our country. This means that they want everyone to pay the tax they owe. Their whole reason for being can be boiled down to this one fact. Part of this is to investigate and prosecute anyone avoiding their tax liabilities. But you are not avoiding anything. You are saying that you want to pay your tax bill, you’re just struggling right now and need a bit of flexibility. HMRC want to collect the tax you owe and has this flexibility built into their rules. Everyone wants the same thing.
That doesn’t mean that it’s not daunting. Preparation makes it less intimidating. Get all this together and thought through before you pick up the phone.
Information you’ll need:
- Your bank account details
- Your Unique Taxpayer Reference or VAT number
- The total tax bill you owe
- Reasons why you’re struggling to pay
- What you’ve done so far to find the money
- The total you can pay right now and how long you think you’ll need to pay off the rest
Other things you need to be ready to discuss:
- Details of your whole income and outgoings
- Investments, savings and any other assets you have
- Exactly what you’re plan is to get your tax situation back on track
What are the possible outcomes of this conversation?
HMRC might decide that they need more evidence before they come to any decision. They may decide that you can pay a certain amount straightaway. It is also up to them to work out a schedule for any instalment payment plan, based on your ability to pay. It is likely that you’ll have to provide more justification if you’ve been in this position before.
What are the practicalities of HMRC’s decision?
If HMRC decide that you can pay some or all of your bill straightaway, you’ll need to do so over the phone using a debit or credit card. A credit card payment will incur a non-refundable fee.
You may be allowed more time to pay and so set up a monthly Direct Debit to pay off the amount owed. This happens when HMRC can clearly see that, although you can’t afford to pay now, you will be able to settle your bill in the future. Unfortunately, you will have to pay interest on the late payments, so if it turns out that you can pay if more quickly, it’s in your best interest to let HMRC know.
HMRC are entitled to move straight to legal action if you default on any of these payments, or fail to pay any other taxes you owe during this time.
If HMRC cannot see that more time will help you, they expect you to pay your bill immediately and in full. The next step from here, if you cannot do this, is ‘enforcement action’ to recover the debt. This is the worst case scenario that everyone tries to avoid.
Contact HMRC as soon as you can
With the last thought of enforcement action ringing in your head, it’s tempting to do an ostrich on the entire situation. But this definitely won’t help. Remember that any kind of legal action costs HMRC money and that their primary focus is collecting taxes, not spending money on lawyers. All parties want to sort out tax bills before it gets to that stage. Showing willing by initiating contact is a big plus in your favour.
If you want to talk through your tax position before you make the call to HMRC, give us a ring. There are no secrets to learn, or magic phrases to use. But it might just make you feel more confident to run through it with a friendly ear first.
Your main takeaway from this article is get on it as quickly as possible. It costs you more money and stress the longer you leave it. This must be your top priority. Every day you leave it is another day of potential fines. Never mind the fear of the unknown that hovers around the edges of everything until you’ve finalised a solution with HMRC. Your situation is not ideal, but it is resolvable.
