Pay business tax in instalments
Spring 2009
If you are having difficulty paying your taxes, help is at hand – provided you are a business. A new HM Revenue & Customs (HMRC) support service allows businesses affected by the current economic conditions to temporarily delay their tax payments. Instalment arrangements will be tailored to individual circumstances.
The service, which the Chancellor of the Exchequer announced in his Pre-Budget Report in November, covers income and corporation tax, national insurance, VAT and any other payments owed to HMRC.
If you think you will not be able to make a payment, you simply phone 0845 302 1435, provide your tax reference number, details of the tax you are having trouble paying and basic details of your business income and outgoings. HMRC says it will normally give a decision within ten minutes.
Late payment charge waived
Paying late under this arrangement you will still be charged interest, currently at 5.5% for most taxes. However HMRC will not charge late payment surcharges where they would otherwise arise, for example where HMRC agrees to your paying income tax for 2007/08 later than 28 February 2009.
Although 5.5% is higher than the bank base rate, it is less than you would have to pay commercially for an unsecured loan, especially as HMRC charges interest only on the tax owed and not on any outstanding interest.
HMRC says the support line is only for new enquires and that if you have already been chased for overdue tax, you should continue dealing with the office that originally contacted you. However, it seems that you will be able to discuss payment arrangements with that office, and even if you have received a warning letter about court action you can contact the support line if you cannot get through to the office that sent the letter.
Flexible but limited
HMRC will still take taxpayers to court in some circumstances, but if taxpayers keep HMRC informed about their payment difficulties and propose realistic terms, HMRC will normally try to avoid such proceedings. The worst response to threatened court action is to ignore it.
There are limits, however, to HMRC’s new-found helpfulness. If you have already paid your taxes and are now experiencing cash flow problems, HMRC will not make repayments unless your tax bill is reduced. So you need to plan ahead carefully.
In effect, you have official blessing to pay your other bills in priority to your tax – within reason. HMRC will not agree to unrealistically long payment plans and you have to factor in future tax liabilities that will become due.
Maintain cash flow
Remember too that delaying your tax payments can never be a solution to all your cash flow needs. You need to make sure that your customers are paying you promptly, and try to avoid bad debts. Issue invoices swiftly, make sure they are correct the first time to avoid delay in sorting out queries, and chase up payments. Obtain interim or advance payments for large or longer projects. Knowing your customers and their business can help you recognise any difficulties at an early stage. Ensure your customers are credit-worthy and that they understand your payment terms.
It is important to plan your cash flow so that you know what bills you will have to pay, when they are due and how you will ensure you have the funds available. We can help you manage cash flow and explore ways in which you might be able to obtain finance. And whether or not you are experiencing financial difficulty, we will ensure you have claimed all available tax reliefs so that you are not paying more tax than necessary.
