For any business, paying taxes on time is an important part of your financial management and there are significant penalties for late submission or late payment, as well as the distraction you get from having HMRC breathing down your neck.
The main cause for delays is either incompetence in getting the forms submitted on time, or cashflow pressures. The good news is that HMRC do offer a Time to Pay facility (TTP) which allows you to negotiate a settlement of outstanding debts over a period of time. Here are 6 top tips for managing your TTP with HMRC:
- Keep submitting returns: Late submission of a tax return should always be avoided, even if you can’t afford to pay it. If you are having problems with them then hire a competent Bookkeeper who can ensure they are always filed on time. This saves you late filing fees, and also keeps HMRC on your side when you do come to negotiate.
- Communicate: HMRC can sometimes be a little slow in figuring out that you have not paid up to date, but once they are on your case its important that you respond to their questions. When you receive their letter, pick up the phone to their Debt Management Office and start the conversation with HMRC.
- Be prepared: There will be searching questions which are designed to make you uncomfortable. So write yourself some notes before hand as to what went wrong, what you are doing about it so it won’t happen again, and don’t be afraid to defend payments that have been made to suppliers, staff, and yourself to ensure the continued trading of the business. This script will help you to stay focused on the business story, rather than being unsettled during the call by their questions.
- Be flexible: HMRC don’t like agreeing to a payment plan of over 6 months. However if you are unable to pay in equal instalments all is not lost as experience shows that it is possible to agree smaller payments at the start (for instance if your income is seasonal, or you are expecting a large order), or to mix up the repayment with a tax refund or tax credit that may be in progress. An initial payment no matter how small can be a deal clincher in getting them to agree to a TTP plan as like everyone HMRC would rather have something than nothing.
- Make it affordable: You will be required to make an offer which needs to be affordable. Whatever you agree make sure you can stick to the repayment plan. Technically the TTP agreement only stays in place if you keep your other taxes up to date going forwards.
- Keep communicating: As we all know, further delays or problems can occur, and this is where the relationship you build becomes important as the notes on your HMRC file provide the building block for the next conversation. If you have missed a payment on the plan, then give them a call, walk them through the revised script (consider including a cashflow forecast) and try to renegotiate new terms.
In the end HMRC behaves like any creditor who you owe money to. They are much easier to deal with when you communicate, and receiving a payment of any kind shows you are not burying your head in the sand. Bringing in a professional Adviser or Finance Director, albeit part time, shows HMRC that you are taking the matter seriously, and working on resolving the situation, and they can assist you with building your cashflow projections and with the negotiations themselves.
This blog has been written by Simon Williams, Client Finance Director with Tectona.
To find out more about managing HMRC or if you would like to discuss any of the other topics covered above further with Tectona Partnership, please contact Mark Nicholls on 07818 407061