Problems paying VAT

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Many companies and individuals face problems paying VAT bills in full and on time. As VAT is payable, normally quarterly, businesses and individuals that hit this threshold can find it hard to budget.

If you face problems paying VAT there are options and ways to keep these arrears in check and your business on track. You could consider switching to monthly VAT if it helps to budget better – Your accountant can assist with this.

In this article, we discuss options when anyone has problems paying VAT – or tax in general – and discuss ways to solve these issues further.

Whether you are a small or large enterprise, business can suffer as cash flow can be massively affected when in debt, especially when owing to HMRC. This can lead to staff redundancies and even business closure.

According to Government statistics, there are 5,200,000 small to medium enterprises operating in the UK, employing some 25,200,000 people – How much does owing the ‘taxman’ affect these businesses? What if you are struggling with a VAT problem?

All of us, including larger companies can find ourselves in a position where we’re unable to pay tax on time. Many of us will have sleepless nights worrying about bankruptcy or legal action, even losing our homes and business owing to being in debt.

Companies, who have problems paying VAT bills, can find themselves facing some tough collection action from HMRC. All it takes is a difficult quarter and the next VAT bill can quickly become an issue. Cash flow suffers as any available funds are being used to either keep the company going or to pay HMRC and if you ‘roll’ this scenario forward, how do you get out of the cycle of VAT debt issues with HMRC?

This is where a VAT Payment Plan can assist you.

Given as a concession, Time to Pay Arrangements are there to help companies repay late or overdue taxes back at an agreed monthly figure over a set period of time. This is an option if you have problems paying VAT or any other head of tax for that matter.

In many cases the monthly amount is based on the amount owed to HMRC, re-payment time frames and HMRC’s own criteria – Many businesses then struggle to meet the level HMRC are requesting. If this is the case then seek 3rd party assistance, we have got Time to Pay Arrangements agreed where others have failed.

Other surprises!

HMRC can now demand securities against potential future debts and are especially pushing this when companies have problems paying VAT.

A Security Requirement is a legal requirement and can be requested for debts like PAYE, VAT, NIC and a few other heads of tax. It’s HMRC’s way of limiting the issue surrounding bad debt books, especially if they are concerned that a business cannot pay it’s debts in the future.

HMRC will issue a ‘Notice of Requirement’ to give security to companies and their Director, or to LLPs Limited Liability Partnership) and their partners, if;

• They failed to comply with their tax obligations in their previous or current business; or

• HMRC have spotted that the Directors were connected or associated with multiple business failures.

If you disagree with anything in the notice, then you must appeal to HMRC within 30 days of the date of the notice, setting out what you disagree with and why. HMRC should then contact you to discuss it. If no agreement can be reached, the matter may be referred for internal review or a hearing before the First-tier Tribunal.

Failure to give security is a criminal offence and HMRC may prosecute the company and Directors, or the LLP and partners. If the company cannot fund the security and has problems paying VAT, it can seek a Time to Pay Arrangement before the deadline.

If the Securities team understand that a Time to Pay Arrangement is under discussion and viable, they will consider dropping the request and stepping to one side to see the outcome of the negotiations. It is our findings that if you enter into a Time to Pay Arrangement, for VAT arrears and / or separately the requested securities, it can be dealt with. If you have no current problems paying VAT and all parties agree upon this option.

In some instances the Securities team will take that step, as long as the Time to Pay Arrangement is adhered too and the company clear it’s VAT issue and remains on top of upcoming liabilities. They may start the Securities Request again if the company has problems paying VAT as agreed.

If you or your business has problems paying VAT or finds itself in difficulties, there are solutions out there. It isn’t always necessary to consider liquidating your company / business – Always seek professional advice.

So let’s be honest, who are HMRC?

They are one of the UK’s largest organisations. At 31st March 2015, they had around 58,6000 full time equivalent employees in 167 offices across the UK, collecting tax duties from 45 million individuals and more than 5.4 million businesses. Each year they receive 60 million phone calls and 15 million letters from Self-Assessment and VAT customers alone.

Small Business Customers – There are more than 5 million small businesses, which employ fewer than 20 people and have an annual turnover of less than £10 million. Micro businesses employ fewer than 10 people, with a turnover below £2 million. Around 70% of small businesses use an agent for some or all of their tax affairs. The number of small businesses trading has grown by more than half since 2000, with a rapid rise in Self-Employment and online trading.

Large Business Customers – There are around 2,1000 large businesses, each with an annual turnover of more than £200 billion, or 40% of total tax receipts. Almost half of large businesses are under enquiry at one time to ensure that they pay the tax due.

It is also a costly exercise for HMRC:

• Some items that make up HMRC administration costs are: Staff Costs (£2.3 billion) ‘Other’ Administration (£0.4 billion) IT (£0.7 billion) and Accommodation (£0.3 billion).

• The Department’s Receivables Management Service is responsible for collecting and enforcing recovery of debts. It employs around 8,000 staff and costs £150 million a year.

In order to validate the costs, HMRC will always consider how best to collect any outstanding VAT debts in, this is purely a cost saving exercise on their behalf. What is the cost difference of winding a company up against collecting the debt across a period of time?

If you are having problems paying VAT or other taxes, HMRC’s process is reliant on the shortest re-payment time possible which is cheaper to HMRC to manage but not always possible for businesses, especially if they are in difficulties.

Remember that there are people who can help.

If your company has problems paying VAT or any other head of tax and you would like further advice, please call our friendly team on 0800 448 0293, visit our website and start a live chat or email

As a team, we specialise solely in tax re-payment plans – A Time to Pay Arrangement – tailored to our clients requirements, for a variety of Self-Employed individuals and businesses the length and breadth of the UK. Our flexible approach helps assess personal and / or business tax liabilities in a compliant way, keeping our finger on the pulse of an ever changing industry, where staying on top of legislation and HMRC’s activity is paramount.


VAT help? How it is best to address this with HMRC

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Looking for VAT help across the internet can be endless hours of searching, with so many companies out there offering assistance in a variety of ways, who can you talk too? Who is going to listen and understand your needs for the business? What is important when getting advice around VAT help topics?

Is your business struggling to pay a VAT bill? Do you need specialised advice around VAT or overseas transactions / contracts? Do you simply need a helping hand?

VAT help comes in many forms and the guidance you are given can be critical to ensuring you don’t get any nasty surprises from HMRC. Here at Tax Debts Help and Advice we have access to a variety of qualified specialists whose sole focus is offering VAT help on any topic that is concise, clear and informative.

Income Tax, National Insurance contributions and VAT are the three largest sources of revenues, as far as tax is concerned. They are forecast to contribute almost two-thirds (62%) of tax receipts for the upcoming 2017-18 year! Needless to say, VAT plays a massive part! If you need VAT help, then simply continue to read.

HMRC take VAT more seriously than some other forms of tax debts, they have for a long time been somewhat known as the ‘bully boys’ of HMRC. So if you are behind with your payments of VAT, or need general VAT help, our advice is to act promptly to ensure the situation doesn’t escalate or to ensure your business is correctly set up for VAT prior to any issues becoming apparent.

Accruing VAT arrears can be an indicator of deeper business issues, in some instances. Bear in mind that problems in this area may prompt HMRC to probe deeper into your company’s tax affairs – The sooner you try and get something sorted, the better. No one wants a VAT investigation landing on them!

HM Revenue and Customs have significant resources at their ‘finger tips’ to recover unpaid taxes; so it’s vitally important to make them a priority, especially if your business is in arrears. Speak to an advisor; seek some specific VAT help or guidance as soon as possible.

Many companies experience VAT issues and subsequent debts to inaccuracies, specifically as they reach the VAT threshold. Sometimes businesses do not register the business for VAT when they should or equally do not deregister when the business turnover drops below £83,000.00. The taxable turnover threshold for VAT is £85,000.00. If you are unsure on your companies position in this area then get some VAT help from your accountant or qualified person – mistakes can be extremely costly!

If you fail to keep VAT records straight, it can create issues with the amount that is expected by HMRC and the amount that the business is aware it owes. Problems also arise when VAT returns aren’t filed on time or at all; this can lead to HMRC working on estimated bills and if not paid, winding up a company based on a ‘guessed figure’!

Always ensure you stay up to date on returns, it could; in turn help reduce accruing debts too.

What you can do: VAT arrears are best tackled head on; keep the lines of communication open with HMRC, and negotiate where possible – There is help out there, both from HMRC themselves and 3rd parties, such as ourselves in the form of a Time to Pay Arrangement.

HMRC has a business payment support service (0300 200 3835), contact them to see if they can assist you with your VAT payment problems. Make sure you are prepared, as they may want to know the following:

•Why you cannot make your VAT payment;

•What are you doing to raise the funds to pay the VAT that HMRC is owed;

•What, if anything, you can pay immediately;

•How long it will take to pay the balance of VAT owed.

If you find you ‘hit a wall’ with HMRC, Tax Debts Help and Advice are experienced negotiators with HMRC and are able to navigate the ‘mine field’ that is the Revenue on our clients behalf. Our VAT help solutions are based around supporting you through this difficult time and taking the stress away by speaking to HMRC on your behalf.

For further VAT help assistance, we offer a fully confidential helpline which you can call at any time to receive advice. Call us for a friendly chat on 0800 448 0293, visit our website and start a live chat, or email

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