Many businesses and their owners are falling behind with their tax payments. HMRC now have a singular approach to dealing with all taxes, including income tax, VAT or any other tax bill. If HMRC decide that you “can’t pay”, expect some sympathy and co-operation, but you’re in the “won’t pay” category, you’ll be in for a rough ride.
“Can’t pay” scenario: HMRC will be more amenable to negotiating deferred payments - so called “time-to-pay deals”. Under these arrangements late payment surcharges could be suspended or cancelled.
“Won’t pay” scenario: If on the other hand you’ve chosen to pay other bills, e.g. your suppliers, ahead of the tax liabilities, you can expect little mercy and HMRC will quickly move to enforce payment by county court proceedings - for which you’ll have to meet their costs. Some tax professionals have also reported a marked rise in the threat of bankruptcy proceedings for tax debts as low as £1,000.
There’s no strict timetable for how long it takes HMRC to decide which category of late payer you are, but as a rule of thumb it will be around two weeks before an outstanding tax bill receives individual scrutiny.
The first step to keeping your name off the “Won’t pay” list is to contact HMRC as soon as you know you won’t be able to pay on time. For example, if you need more time to pay your self-assessment tax bill due on July 31 now is the time to get in touch. Paying other creditors ahead of the Tax bills can put you on the “Won’t pay” list and payments will be enforced via court proceedings.