Top Ten Inland Revenue and VAT Warning Signs. (HMRC)

1. You are not paying the monthly PAYE deductions on time.
   
   
2. You have had penalties from the Inland Revenue.
   
   
3. You have not prepared or filed the required PAYE paperwork with the Revenue.
   
   
4. You are not filing VAT returns or paying the VAT due on time.
   
   
5. Your company has had a VAT surcharge.
   
   
6. The local tax collector has passed your file to the enforcement office or the debt recovery unit.
   
   
7. You have done deals with the taxman to pay back arrears over time.
   
   
8. You have failed deals with the taxman.
   
   
9. HMRC has taken legal action against your business.
   
   
10. You have paid unsecured creditors instead of paying the Crown debts.

It should be remembered by directors and business people that the Inland Revenue (IR) and the HMCE (VAT) are "involuntary" creditors. In other words they do not choose to give credit, your business takes it. So the only way that they can ensure payment is to impose rules and regulations upon business or force liquidation if compliance cannot be obtained through enforcement action.

Failure to adhere to these rules may lead to the Crown agents taking action to recover the arrears but the GOvernment's current view (2009) is that all companies with cashflow problems should use HMRC's Time to Pay programme.

Often this is a useful breathing space for the business. However, in our experience it is often merely deferring the inevitable closure. Before entering into any such arrangement with the HMRC consider the following:

1. Have you produced a detailed cashflow to support the notion that you can repay tax arrears?
   
   
2. Can the business make profit in the timescale suggested? It is no use merely saying the cash coming in can pay the tax arrears - if the company is losing money through this period it will simply run out of money if you repay the taxman too quickly!
   
   
3. Do you believe the business IS viable?
   
   
4. You will be alerting the Crown agents that the business is actually INSOLVENT! This is because inability to pay creditors as and when they fall due indicates that the company is insolvent under section 123 Insolvency Act 1986. Clearly then, if you tell the tax authorities that you cannot pay tax on time, you are admitting insolvency. This can lead to wrongful trading issues later if the debt is not repaid or if liquidation occurs.

These are technical issues and you should take proper legal advice, call us now for help.

We can quickly remove the pressure from the Crown where we are appointed to rescue the business. Call us now if tax problems are swamping the company.

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