I can’t pay my tax – will HMRC close my business down?

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.

THREATENING LETTERS
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.

BAILIFFS
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.

WINDING UP
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.