From our experience, the clients that come to us find they are facing increasing pressure from HMRC to pay the liability due. Often HMRC will send an enforcement agent to the company premises to collect the debt, this can be stressful and disruptive to your business.
There are options available. HMRC may agree to a time to pay plan (TTP) which allows you to repay the entire debt over a maximum period of 12 months. By preparing a realistic cash flow forecast you could easily see if this option would be affordable.
Bear in mind that if the company is already struggling to meet current liabilities as they fall due and is essentially fire fighting, then it is unlikely it would be able to manage an additional monthly payment. For example if you have a historic debt due to HMRC of £30,000, over the course of 12 months the company would have to find an additional £2,500 per month. HMRC take a dim view of companies that fail to meet the terms of the TTP. If you fail to keep up with the repayments, the company’s financial position may worsen.
Alternatively if the TTP is not an affordable option, a company voluntary arrangement (CVA) may be better suited to your business needs, allowing the company to continue to trade and alleviating the financial strain of built up debts.
There are a number of benefits of a CVA. It is not limited to just HMRC but can include all of the company creditors, you can write of a proportion of the debt and it can be paid over a much longer period, up to five years. This would allow you to focus on the continuation and profitability of the business rather than being consumed by creditor demands.
By producing a detailed and realistic cashflow forecast, the company could prepare a proposal which would be sent to all creditors, outlining the company’s financial situation and what repayment it intends to make to creditors. This could be total of 50p in the £ to be paid over a five year period. The creditors will be the deciding factor, and if the proposals are accepted the creditors are bound by its terms.
We are able to advise and assist on both a time to pay plan or a company voluntary arrangement. The key is to seek advice as soon as possible to discuss the options available and find the solution that best suits your business needs.