The answer is yes, quite possibly.
hmrc does not care about your business…
HMRC has no interest in your business, or you, or your team members. It’s a horrible fact but it is true. HMRC is there to collect your money, plain and simple. It’s not the fault of the folks who work there. It’s the system that’s broken, not the people. Of course, HMRC say that they have a team of people dedicated to helping you work out a ‘time to pay’ schedule but when you call the time to pay team you are met with a terrier-like approach from someone who has been trained to ask you for your personal credit card details. Our advice is not to bother going down this route. Save yourself the heartache and the high blood pressure.
Bear in mind…
As a business owner having some problems paying your tax you will fall in to one of three categories:
- You have just started your business and it needs time to grow and become established
- You are investing everything back in to the business to have better tools, more team members, bigger offices, more products etc.
- You have had a bad period or you have miscalculated or underestimated what you owe
None of these are good enough reasons to be put out of business. We are not saying that you shouldn’t pay your taxes but you certainly shouldn’t be forced to shut the doors because you can’t pay or need more time to pay.
What to expect from HMRC…
Once HMRC have caught wind of the fact that you can’t pay they will begin a chain of actions in response. Just so you know what to expect from them, here is HMRC’s method of escalation:
‘TIME TO PAY’
Once you tell HMRC you can’t pay, they will recommend that you speak to the ‘time to pay’ team, supposedly to discuss a reasonable payment plan. In reality they will try and get you to pay any way you can, from using your personal credit cards to borrowing from a relative or friend.
If they don’t hear from you, they will begin sending out a string of increasingly threatening letters. They don’t even read what you send them – it goes straight to the shredder! It would be really funny, the fact that HMRC continue to pump out the same crap regardless of what their ‘customers’ are actually sending to them, if it weren’t for the fact that it really upsets and scares folks. So, be warned but stay calm.
After about 6 months, if you haven’t paid or entered in to a time to pay arrangement, HMRC will send the ‘thugs’ to your workplace. They call themselves HMRC bailiffs but as far as we are aware they are not employed by HMRC. They are an independent firm of ‘nasties’ who have ‘won’ a contract. DO NOT LET THEM IN! By law, they are only allowed to take assets that belong to the business but in reality, once they are in they will take whatever they can lay their grubby little hands on, including your team’s personal belongings and your landlord’s fixtures and fittings! You will not be able to negotiate with them and whilst they may tell you that you will be able to get your things back once you have proved that they are not owned by the business (yes it’s up to you to prove it!) in reality you will have the devil’s own job doing that. Just don’t let them in.
After the bailiffs have visited you three times or so with no luck, HMRC will start issuing winding up procedures on your company.
So, what are your options?
OK, we said earlier not to call the ‘time to pay’ people as they will not offer any pragmatic help. Here is what you can do instead:
Write to HMRC with an offer of a payment plan, explaining why you are having difficulties, what you can afford to pay and over what period you intend to pay it. Be reasonable. Offer to pay what you can afford and enclose a cheque for the first payment. Keep a copy of the letter and of the cheque and send it recorded delivery to HMRC. You need to bear in mind here that HMRC are always at least two months behind when it comes to opening mail so, even though you will have posted your letter of hope and reasonableness, don’t expect a response any time soon. Do however expect more of the same threatening letters to keep coming through your letter box with regular monotony. We don’t actually know what the percentage success rates are here but let’s hope that your time to pay request is accepted. And if it is: great – well done.
Simply don’t pay until you can afford to do so. Your bill will incur penalties and interest, but it’s not that much really in the grand scheme of things. If you are waiting for a big invoice to be paid or know that business is going to pick up in the not too distant future then just make HMRC wait and pay the bill plus the interest when you have it. Treat them like you would anyone else that you owe money to even though they are sending through the ‘everyone else can pay their tax why can’t you’ emotional blackmail letters that really get our goat. One could retaliate with the appropriate ‘when you stop squandering our money on shit public services or giving it to your friends in the banks’…. but that’s just going down to their level and they don’t care anyway, remember.
Create a new company to take on your business but with a different name and without the debt. If they can’t see that it is in their interest to come to a payment arrangement with you then leave them to play by their stupid rules and internal processes and shoot themselves in the foot. The parasite kills its host! Please note: this is only necessary if you do not reach an agreement with HRMC and they begin winding up proceedings. And remember, there are strict rules about winding companies up to remove debt and starting again, “phoenix companies”, as this is seen as fraudulent behaviour. If this is what you have done intentionally then you could be in pretty serious trouble. However, If you have moved your assets to a new company because you have exhausted all other avenues, including attempting to negotiate payment with a creditor that refused your payment plan, you are well within your rights, as a business owner, to exercise prudence, ring fence your problem and live to tell the tale.
Rangers FC offered a practical payment arrangement to HMRC but were forced into liquidation instead, even though this meant loss of money for the taxpayer – negligent or what?
The Wizard of Oz – do not be intimidated
The key is to know your rights and what you can do and take the available steps to deal with the bullies effectively, without losing any sleep or, more importantly, your business. By the way, this need not to cost you a single penny in, so-called, ‘professional’ fees and it shouldn’t take up much of your time either. We believe that it is your moral obligation, as a business leader, to defend your business from heartless bullies. You also owe it to your customers, suppliers and team members to fight for your business and live to tell the tale.
HMRC is like the wizard in the Wizard of Oz. All booming and scary in their communications and their propaganda but behind the scenes lies a different story. Their inept management has created a culture of bunch of brainwashed, cake eating, corduroy wearing envelope stuffers who can barely be arsed to answer the phone when it rings, or so we have been told by people who have been inside and seen it with their own eyes. Does that conjure up a scary picture? No, it is a sad and sorry story of bad management and leadership failure – on a grand scale.
15 thoughts on “I can’t pay my tax – will HMRC close my business down?”
Very reassuring website, Q. how to distance yourself from the endless emotional cosh of the “time to pay” terriers – A. One tactic is to ask them to register someone else to negotiate for you – ie what you can call your business manager – the ‘business manager’ can still be you – they dont know – they are still terrier like but at least you can act as someone else and not take it personally and so get some emotional space that allows you to run your business and make the money to pay
I just found this by accident but brilliant appraisal of current state of HMRC and I speak from experience! They should actually be wound up for their inept management and bad business management. I started my own business last year and if I ran my business the way they do I would have been wound up long ago… I have never in my life be made to feel more like a criminal than I do by certain agencies who it seems is their sole aim to actually close you down, instead of encourage growth and prosperity.
I have been informed by HMRC that they are passing my papers to their solicitor for winding up petition. How long does it take for the petition to be served, and also if I pay will they stop it. Desperate
Hi David, sorry to hear and sorry for lateness of response. Best bet would be to call us on 0203 326 0133 for advice. Best of luck in the meantime!
I can’t pay my corporation tax, its the second year I’ll have had to make arrangements to pay in instalments. I know I won’t be able to clear the debt within 12 months as I won’t be able to afford £2k/month to clear this years corp tax bill…
I’m going through a separation/divorce, and I’m hopeful my ex will sell the marital home which means I’ll get a lump sum to clear all my debt – do I call HMRC to tell them, or do I ignore HMRC until I can pay? I’m worried sick that I’ll lose everything I’ve worked for
Hi Tony – thanks for getting in touch and sorry to hear about your situation. However, don’t despair just yet. First off, you should be aware of the difference between a company debt and a personal debt. Selling your marital home won’t have any effect on the company’s position as it will be personally owned. The good news is that HMRC are normally quite accommodating when it comes to payment plans, particularly in hardship cases. That said, we’d be happy to speak to HMRC on your behalf if it’s causing you distress. We’re used to dealing with HMRC and with cases such as yours so I think we could definitely be of assistance. I’m going to send you an email now. Thanks again for reaching out. Cheers, Tom (Partner, Optimal Compliance)
Gosh what a brilliant article. I’ve just come out of a terrible year of difficult trading. I’ve finally paid my first VAT return on time, and have climbed a mountain of £66k VAT debt, paying back £20k (and a £10k tax return on time – phew). I have a deadline set by the Field force team of mid Jan, but I think I can only get my hands on another £25k to give to the HMRC by that date, leaving me £20k short. I keep talking to them, but I wonder when i get to the cut off date if they’ll give me more time to pay of the £20k as I’ve been shown to be trying so hard!!
Hi Lucy, thanks for your kind words and sorry to hear that you’ve been having trouble! We would recommend keeping the lines of communication open re the missing dosh come deadline day… They tend to be more reasonable when, as you say, you’ve been trying so hard to get things resolved. If you’d like any further advice or support, please don’t hesitate to drop us an email or give us a ring. Cheers! Tom (Partner, Optimal Compliance)
I have just come off the phone to HMRC and they are threatening a wind up notice. I have spoken to them regarding the debt, which is £6000. I am a small independent trader and struggling to pay much towards the debt. They have given me to the end of the month to pay in full, suggesting I borrow money from the bank, parents, friends and get credit cards so they can have their money. I’m at my wit’s end with this.
Shane, sorry to hear mate. That’s terrible though sadly not surprising that the Revenue is telling you to borrow money and take out credit cards etc… Feel free to get in touch with us if you would like some help/advice. All the best, OC
I have outstanding corporation tax of £2,900.00 from last year and now plus £6.500 a new one which should be paid before 1st January 20, total around £9,500.00.
For last year I had set up plan with HMRC to pay my tax in Monthly instalments but I had some Family problems and I stopped paying them. The last letter from HMR I had in November 19 (Notice warning of legal proceeding) to call them what I did but they did not want to set up again new plan to continue paying, I only heard that they put my account to Enforcement team and they cant do anything now and I have to wait. Yesterday I received text from HMRC about the same thing to contact them and again calling I heard only that they can’t help me because my account has been passed to Enforcement office. I want to pay this in instalments as I can only afford 800.00£ Monthly payment. I am working as a Contractor and have a small income.
What should I do now? Who to contact ? what to expect next? I want to start repaying this, but HMRC any time I am calling them I hear the same that I have to wait for Enforcement team. From November 19 I did not get anything, why they texting me to contact HMRC if they don’t help anyway. I don’t want to have knocking bailiffs on my door, but I am not getting any letters/ reminders at all so I don’t know what to do now. I don’t have any assets, only old computer I mobile which belongs to my Ltd company , anything else.
Last two weeks HMRC started sending me text s to pay now, I called them but they dont want to set up plan again. I will pay £800.00 on the 31.01.2020 but I dont know what to expect next. when they will send Bailiffs
Hi, I have recieved a letter from bailiffs due to me not paying my VAT bill, this was due to suffering chronic ill health. I have contacted HMRC via their website to ask them if I can clear my bill over the next 6 months. Should I contact the bailiffs to inform them?
I am having difficulties paying my payee and vat bill. I want to write to them with an offer but dont know where to write to and what to write can you help
Fantastic Article, and provides non nonsense practical advice for the real world.. we have been through a lot of this, and we had to liquidate one company and push the trade into another.. awful harrowing experience and HMRC came this close to shutting us down. We saved all jobs and lived to fight another day, but HMRC have done a VAT investigation since, and have been hard on the other company, and have recently opened a personal SA investigation for a period a few years back.. really nasty processes and we are law abiding, tax paying, job creating people!!
Excellent article. Thank you