HMRC Arrears and Corporation Tax changes

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What are HMRC arrears?

These arrears occur when you owe some form of tax money to HM Revenue and Customs (HMRC).

You have to deal with outstanding HMRC debts as soon as possible. HMRC debts come in a variety of forms, such as Income Tax (PAYE), NI or VAT arrears. These are classed as priority debts.

If you do not repay these debts, the consequences can be severe. It could lead to the involvement of court action or bailiffs.

Worried about your HMRC arrears or Corporation Tax?

If you are worried about how you are going to repay your HMRC arrears, we’re here to help you! There are many people who will find themselves in a financial struggle after falling behind with your payments to HMRC. Here at Business Helpline,  we can discuss all of your options and help you plan for a better future.
Call our team today on 0800 088 2142.

When should you deal with HMRC debts?

There are many ways that you can deal with your tax arrears. Follow these 5 steps if you are unsure how to tackle this financial issue.

1. Double-check

HMRC has to be asking you for the right amount. If they are asking for too much then you have a right to take them to task. Make sure that the information you have given them with regards to your business takings and expenses is up-to-date. You never know, the money you are supposed to owe might have been overestimated.

2. Budget

You need to work out a plan for income tax arrears. An accountant could help you to work this out or, alternatively we could help out if you give us a call. Essentially, you have to maintain a good budget and organisation of your finances.

A budget should cover household costs such as rent, mortgages and council tax. After this, you will know how much you can afford to pay back with your tax arrears. We can help you to put an effective budget together if you get in touch with us.

3. Negotiate 

You need to agree to a regular payment to get rid of the debt. Only offer a payment you can afford. That payment should never be affecting your living costs (money put aside for rent, food and necessary transport).

4. Make your payment
Start making your payments as soon as you can after speaking to HMRC. Make the offer first and foremost as, even if they don’t accept, it demonstrates your willingness to negotiate.

5. Maintain good communication with HMRC
If you are able to keep updating HMRC with your latest progress then they will at least appreciate your efforts to make your payments.

What happens if I don’t pay my HMRC debts?

Further actions can be taken against you if you don’t pay your HMRC debts. If you owe more than £5,000, HMRC can start bankruptcy proceedings against you.

Can HMRC send bailiffs to collect my debt?

In short, yes. HMRC doesn’t need a court order to visit your place of work and take your stock. However, they can only take stock that is upto the value that you already owe.

A bailiff can go to your home if you do not have enough value from goods within your business. This is known as an enforcement agent. HMRC officials can get a warrant to break in if you deny them access initially.

Can HRMC apply for a County Court Judgment?

HMRC could get a County Court Judgement (CCJ) against you. You will receive some court forms that you will have to fill in, looking to agree to making an affordable monthly repayment amount.

If you don’t pay the CCJ, an enforcement method can be used – attaching the debt to your property.

When can HRMC start bankruptcy proceedings against you?

HMRC can file for a bankruptcy against you if you owe more than £5,000.

Can HRMC take money from your wages?

HMRC is able to do this for debts of up to £3,000 if you earn less than £30,000. Any more than this can be collected through your tax code. This can be a maximum of £17,000 if you earn more than £90,000 annually.

Can HMRC take money from your savings?

HMRC can take money to pay tax and tax credits from savings held in banks and building societies.

This method is only viable for debts of more than £1,000, though, and £5,000 must be left over in savings. Therefore, if you have less than £6,000 in your account, HMRC cannot take action.

What is a Time to Pay arrangement?

A Time to Pay (TTP) Arrangement lets you pay your debt to HMRC in monthly installments, usually over a 12 month period. You could arrange repayment over a longer period, depending on your business’ circumstances and what you can afford.

How you come to a TPP Arrangement depends on whether you have received a payment demand, like a tax bill or a letter threatening you with legal action.

You should call the HMRC office if you have received a letter. If you haven’t received a letter, call the Payment Support Service (PSS).

What happens if you miss a payment?

HMRC is able to do this for debts of up to £3,000 if you earn less than £30,000. Any more than this can be collected through your tax code. This can be a maximum of £17,000 if you earn more than £90,000 annually.

What else can I do if I fall behind on HMRC payments?

There are some other options available to your business if you get into trouble with tax arrears.

Protect your company from the legal action of HMRC by entering into:

▪️ A company voluntary arrangement (CVA) – this gives businesses the time they need to work out a different kind of payment plan

▪️ Administration – when a person or business from outside of your company steps in to take control

You could consider raising funds via financing or invoicing if you want to pay off your debts quickly.

You might also have considered closing your company down, through dissolution or liquidation.

Please don’t hesitate in talking to us before making any big decisions such as this. Our expert advisors will paint the best picture for you and your business, ensuring that you find the best way out of the situation that you are currently in.

What else can I do if I fall behind on HMRC payments?

There are some other options available to your business if you get into trouble with tax arrears.

Protect your company from the legal action of HMRC by entering into:

▪️ A company voluntary arrangement (CVA) – this gives businesses the time they need to work out a different kind of payment plan

▪️ Administration – when a person or business from outside of your company steps in to take control

You could consider raising funds via financing or invoicing if you want to pay off your debts quickly.

You might also have considered closing your company down, through dissolution or liquidation.

Please don’t hesitate in talking to us before making any big decisions such as this. Our expert advisors will paint the best picture for you and your business, ensuring that you find the best way out of the situation that you are currently in.

Can HRMC apply for a County Court Judgment?

HMRC could file a CCJ against you. You will receive some court forms that you will have to fill in, looking to agree to making an affordable monthly repayment amount.

If you don’t pay the CCJ, an enforcement method can be used – attaching the debt to your property.

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Corporation Tax FAQs

What is corporation tax?

Corporation tax is a tax that is imposed on limited companies in the United Kingdom, as well as some other organisations. It is based around the amount of profit that the business makes annually, taking into account some specific expenses which can be claimed.

When is corporation tax due?

Corporation tax is due to be paid 9 months and a day after the end of the accounting period. If it a fully normal accounting year, this will be due 9 months and 1 day from the end of the year. However, earlier dates will apply if the financial year exceeds 365 days – as it often does in the first year.

What happens if I cannot pay my corporation tax bill?

In the first instance, HMRC will get in touch with you with a reminding letter, warning you that your corporation tax payment needs to be paid. They could send a bailiff or a HRMC enforcement officer to seize goods from your business, f you choose to ignore their initial warning.

HMRC are known for acting efficiently when it comes to chasing after tax arrears. They will move particularly quickly if they know that their debtor business is insolvent.

Tax debts of up to £750 or more can be petitioned and wound up by the company, forcing it into liquidation. This process will be investigated by an Official Receiver, who will look into how the director has handled the company’s affairs and whether they have acted in a responsible manner.

You should always contact HMRC as soon as possible if you are concerned about not being able to pay your corporation tax. This shows that you want to get on top of the problem instead of trying to run away from it. A cooperative approach with HMRC will help you in your mission to fix this problem.

What is my last case scenario regarding corporation tax troubles?

It would not be ideal but a Creditors Voluntary Liquidation (CVL) would be a way of finally providing some breathing space from the problem that you find yourself in. Please do come and chat to our understanding experts before jumping down any avenue, though!

How have corporation taxes changed in the recent budget?

The rate of corporation tax will remain at 19% for the Financial Year beginning April 1 2022. However, there is an increase expected from the Financial Year in 2023/24, with rates going up to 25% when aimed at profits over £250,000.

Companies with profits that are greater than £50,000 or less will continue to pay a small profits rate (SPR) of 19% from the 2023/24 Financial Year. Companies with profits between £50,000 and £250,000 will pay tax at the main rate, minus a marginal relief rate.

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