As the upcoming self-assessment tax return deadline is looming, if it becomes apparent that you can’t meet your tax liability to HM Revenue and Customs (HMRC) after exhausting all the available options to raise funds, you should inform them, rather than stepping into the firing line to be hit with penalties, surcharges and enforcement action.
Your first port of call should be to contact HMRC to allow yourself some breathing room before the deadline hits. If you fail to inform HMRC, you will be subject to enforcement action which could have a drastic effect on your trade, both financially and legally.
After exploring affordability to pay your self-assessment tax bill, if HMRC believes that you are unable to pay the funds, but will be in a position to do so in the future, HMRC may agree to a Time to Pay arrangement, allowing you to spread the cost through instalments.
If you are contacting HMRC before the deadline, call the Payment Support Service. If you are getting in touch after the deadline, call the Self-Assessment Payment Helpline.
Negotiating a Time to Pay arrangement (TTP)
When contacting the Payment Support Service to request a Time to Pay arrangement, you should have your 10-digit Unique Taxpayer Reference or VAT reference number to hand.
They will enquire why you’re finding it difficult to pay your tax bill, how you’ve attempted to gather the funds to pay your outstanding tax bill and how much you can immediately pay, including the extended timeframe in which you require to pay the remaining amount. They will also request details of your income, expenditure, assets, savings and investments as this will mitigate the decision.
If the TTP is granted, HMRC may allow you to pay in instalments over a time frame of 6 to 12 months, however the timeframe can vary as it is discretionary.
What enforcement action can HMRC take?
HMRC are able to take enforcement action against you to recover money from your unpaid tax bill. Here are some of the ways in which HMRC can take action:
- Collect owed money through earnings or pension: HMRC can change your tax code to instruct deductions directly from your salary to recover outstanding self-assessment tax
- Instruct debt collectors: HMRC may instruct a debt collection agency to recover owed tax which can lead to taking control of goods
- Repossess belongings: If you are unable to repay owed tax, an HMRC officer can take possession of your items to sell them and recover money. This applies to you if you reside in England, Wales or Northern Ireland
- Recover money from your bank account: HMRC can directly take what they are owed by accessing your bank account, also known as ‘direct recovery of debts’. This applies to you if you reside in England, Wales or Northern Ireland
- Take court action: HMRC can begin court proceedings against you which you will be informed of through a court summons. In addition to recovering owed funds, you will be liable for any court fees incurred. The rules are different if you reside in Scotland
- Issue a winding-up petition: Creditors can apply to close down your company, also known as compulsory liquidation. This can be done either through a court judgment or a statutory demand before the forced closure of your company. You may require assistance from a licensed insolvency practitioner in the event of compulsory liquidation
You may be subject to a surcharge and interest on the outstanding figure if you fail to pay your tax on time. Speak to your accountant to find the best route forward if you are unable to afford your self-assessment tax bill as you may be able to release money from other avenues. By seeking the assistance of an accountant, they can manage interactions with HMRC, sparing you the hassle.
Handpicked Accountants can partner you with a reputable, local accountant who can provide tax planning advice to help you operate efficiently. An experienced accountant can help you structure your income and forecast HMRC liabilities, ensuring that you’re financially prepared and notified of any upcoming deadlines. They can help you budget, forward plan and work towards achieving your long-term company goals. Contact a member of the Handpicked Accountants team to find a Handpicked Accountant in your local area.