By Rob Adamson, Restructuring and Insolvency Partner, Armstrong Watson LLP

FOLLOWING a long period of business support measures and postponement of tax payments, HMRC has made it very clear it is keen to collect any unpaid VAT or other taxes owed.

With the issue of a guidance paper entitled “Collecting tax debts as we emerge from coronavirus (Covid-19)” HMRC’s message is simple: If you can pay your taxes then you should do so – but if you’re struggling, HMRC wants to work with you to agree a plan based on your financial position.

The support HMRC can offer will vary from business to business, but typically a payment plan (called a Time to Pay Agreement or TTP) will be discussed, where customers pay what they owe in affordable instalments, generally lasting up to one year.

Nevertheless, HMRC has ramped up collection activities and has lots of weapons in its armoury to collect debts, with enforcement powers including taking possession of business assets that can be sold to pay off tax liabilities. County Court proceedings can also be commenced, resulting in the issuing of a charging order against business assets, and where a business is part of a Government-accredited scheme, such as a road haulage licence, we have also seen HMRC threaten to revoke these where Crown debts remain unpaid.

It is worth noting directors can be held personally liable for a company’s tax liabilities – where HMRC considers that avoidance or evasion has taken place, or where it has evidence of running up liabilities in a limited liability entity – and that HMRC is now a secondary preferential creditor in formal insolvencies, meaning it is higher up the pecking order when receiving a distribution.

If your business is in arrears it is vital contact is made with HMRC. If you are seen to recognise the problem and have a will to resolve it this will put you in a stronger position when it comes to negotiating a payment plan. Evidence of your business’s income and expenditure will need to be produced in a timely manner to agree a TTP, based on past results and future forecasts. The accuracy of this process is very important as failure to meet repayment instalments can lead to HMRC commencing enforcement action.

Our Insolvency Practitioners have extensive experience setting up TTPs, and we have additional tools at our disposal to help rescue a business or a part of it. Acting quickly will help ensure you keep your businesses afloat and trade your way back to profitability.

Phone Rob Adamson on 0113 2211336 or email to discuss your options.