HMRC VAT - Chasing Debts
Discussion
I'm in the unfortunate position of using VAT money to cashflow my seasonal business through COVID which would have otherwise gone under by now without a doubt. Cash flow was tight before the pandemic but we always managed - only just, COVID has made it worse but we're recovering now and things are looking good. We're in retail and import stock as well as buy from UK importers so have a lot of cash tied up in stock.
I haven't filed my VAT returns for April 2020 onwards but here's the catch, I need to continue to use the VAT money to cash flow my business until Christmas as that is peak trading for us and when the money really comes in big time - our last Christmas was crap and we suffered. So how long do you think HMRC will give before throwing around winding up petitions ? I also owe £10,000 CT due April 2020, only had one letter from an agency about this so far and I've chosen to extend my accounts due for another 3 months as Companies House allows.
My accountant, always the optimist has advised it's nothing to worry about and to just send any HMRC letters to him and he'll get them to back down blaming coronavirus, but my worry is I get a winding up order and all my trade creditors pull the plug. I've been told HMRC can go straight to this option without even sending a statutory demand?
VAT owed to HMRC:
04-06/2020 - £50,000 - File now and set up a deferred payment plan of £5,000 per month - I'm told this is simple. That will show I'm still trading and working on my debts?
07-09/2020 - £25,000 - Options? Time to Pay? Over How Long? As long as possible.
10-12/2020 - £25,000 - Options? As above.
Total: £100,000
I'm confident the business will be turned around this year as I've pivoted the business in a different direction which is already paying dividends, but we just need to keep the cash flow going until Christmas - and then we can pay all our bills and everyone will be happy, including HMRC! What would you do in this situation?
I haven't filed my VAT returns for April 2020 onwards but here's the catch, I need to continue to use the VAT money to cash flow my business until Christmas as that is peak trading for us and when the money really comes in big time - our last Christmas was crap and we suffered. So how long do you think HMRC will give before throwing around winding up petitions ? I also owe £10,000 CT due April 2020, only had one letter from an agency about this so far and I've chosen to extend my accounts due for another 3 months as Companies House allows.
My accountant, always the optimist has advised it's nothing to worry about and to just send any HMRC letters to him and he'll get them to back down blaming coronavirus, but my worry is I get a winding up order and all my trade creditors pull the plug. I've been told HMRC can go straight to this option without even sending a statutory demand?
VAT owed to HMRC:
04-06/2020 - £50,000 - File now and set up a deferred payment plan of £5,000 per month - I'm told this is simple. That will show I'm still trading and working on my debts?
07-09/2020 - £25,000 - Options? Time to Pay? Over How Long? As long as possible.
10-12/2020 - £25,000 - Options? As above.
Total: £100,000
I'm confident the business will be turned around this year as I've pivoted the business in a different direction which is already paying dividends, but we just need to keep the cash flow going until Christmas - and then we can pay all our bills and everyone will be happy, including HMRC! What would you do in this situation?
Crikey, I ran a small IT consultancy until 2020 and on the odd occasion I've been >6 weeks late with my return they've got s
tty with me, although I am aware that they've stopped doing that during Covid, but I read they are about to recommence 'normal service'.
Don't have much to suggest I'm afraid but I wish you luck. I dare say you are one of many, many people in the same boat.
tty with me, although I am aware that they've stopped doing that during Covid, but I read they are about to recommence 'normal service'. Don't have much to suggest I'm afraid but I wish you luck. I dare say you are one of many, many people in the same boat.
You're one of many.
My advice is to speak with them. You don't really say what you can afford to pay for now but your issue seems to be you want to continue to defer everything for another 9 months? Does that include new liabilities during this year?
They won't let you defer anything not yet due. You will need to get your returns up to date and continue submissions on time along with keeping ongoing quarters liabilities paid on time.
Your best option is to go for a long term deferral with a bullet payment in January 2022 if possible from cashflows.
In general hmrc seem to be trying to be helpful but they are variable and the rules seem to change regularly. I've recently agreed a 5 year deferral and heard of a 10 year one being agreed. That's.. unusual.
Your best bet is to keep it all small, at 100k you'll be taking to the processing team that just need to get through volume. I am currently trying to agree a 2 year deferral for a fully listed company that would see them repay about 1m a month on top of their normal payments. That's proving to be a challenge as it's gone pretty much too the top of the tree. It seems to get harder the higher up you go, understandably.
Right now there's not much they will do in terms of recovery and the stay on winding up is rumoured to be getting extended this week, but not yet confirmed, so that does give you some breathing space.
Talk to them.
My advice is to speak with them. You don't really say what you can afford to pay for now but your issue seems to be you want to continue to defer everything for another 9 months? Does that include new liabilities during this year?
They won't let you defer anything not yet due. You will need to get your returns up to date and continue submissions on time along with keeping ongoing quarters liabilities paid on time.
Your best option is to go for a long term deferral with a bullet payment in January 2022 if possible from cashflows.
In general hmrc seem to be trying to be helpful but they are variable and the rules seem to change regularly. I've recently agreed a 5 year deferral and heard of a 10 year one being agreed. That's.. unusual.
Your best bet is to keep it all small, at 100k you'll be taking to the processing team that just need to get through volume. I am currently trying to agree a 2 year deferral for a fully listed company that would see them repay about 1m a month on top of their normal payments. That's proving to be a challenge as it's gone pretty much too the top of the tree. It seems to get harder the higher up you go, understandably.
Right now there's not much they will do in terms of recovery and the stay on winding up is rumoured to be getting extended this week, but not yet confirmed, so that does give you some breathing space.
Talk to them.
Many moons ago, Customs & Excise, as it was then, agreed to an extended payment period with no fuss. Then, out of nowhere, did a U turn, shut the company down, put staff out of work and auctioned the company's assets.
The proceeds covered only 10% of the debt, the auctioneer said he didn't care how much he raised, as long as his fee was achieved.
This was a very small company, the debt was about £8,000 and the delayed payment plan would easily have been achieved.
Utter madness, the debt wasn't paid and the state was lumbered with unemployent benefit for the staff.
The proceeds covered only 10% of the debt, the auctioneer said he didn't care how much he raised, as long as his fee was achieved.
This was a very small company, the debt was about £8,000 and the delayed payment plan would easily have been achieved.
Utter madness, the debt wasn't paid and the state was lumbered with unemployent benefit for the staff.
As others have stated, speak with HMRC.
In relation to the VAT period in 2020 which was allowed to be deferred, there are specific new agreements that can be signed up to which will allow you to spread the payment equally over the next 10 months, without interest. Details are available at https://www.gov.uk/guidance/deferral-of-vat-paymen...
In relation to the subsequent unpaid VAT returns, set up a 'time to pay' agreement with HMRC, as doing this will avoid the risk of them taking action against you, and/or apportioning high levels of interest.
You will obviously be aware government have relaxed the rules on directors duties/obligations during the pandemic, so your risk of 'wrongful trading' or 'trading insolvency' is somewhat reduced, but only until the end of April 2021, at which time at present HMRC could take the necessary action against the company as you mention. As such, best to get something formal in place with them prior.
Finally, do you not have the ability to seek additional funding through either a bounce back loan or CBIL ? This would obviously allow you to repay HMRC (in part of full) and have a number of years to pay over effectively, at a very beneficial interest rate. Alternatively, not knowing what sector you work in, are there not other options available to you such are doing and R&D claim, which you could use any aware to offset against owed VAT monies.
In relation to the VAT period in 2020 which was allowed to be deferred, there are specific new agreements that can be signed up to which will allow you to spread the payment equally over the next 10 months, without interest. Details are available at https://www.gov.uk/guidance/deferral-of-vat-paymen...
In relation to the subsequent unpaid VAT returns, set up a 'time to pay' agreement with HMRC, as doing this will avoid the risk of them taking action against you, and/or apportioning high levels of interest.
You will obviously be aware government have relaxed the rules on directors duties/obligations during the pandemic, so your risk of 'wrongful trading' or 'trading insolvency' is somewhat reduced, but only until the end of April 2021, at which time at present HMRC could take the necessary action against the company as you mention. As such, best to get something formal in place with them prior.
Finally, do you not have the ability to seek additional funding through either a bounce back loan or CBIL ? This would obviously allow you to repay HMRC (in part of full) and have a number of years to pay over effectively, at a very beneficial interest rate. Alternatively, not knowing what sector you work in, are there not other options available to you such are doing and R&D claim, which you could use any aware to offset against owed VAT monies.
fesuvious said:
Shoot one prisoner in the head without mercy.
The two hundred watching will be very well behaved for quite a while.
I still remember the first time I negotiated a TTP - went all prepared with background, plans, what the company was doing, where they'd tried to get other funding - the whole hog. All went well until I tried to add in the sob story about 250 odd people being made redundant - I was stopped in my tracks and firmly told not to pursue that line!The two hundred watching will be very well behaved for quite a while.
To be fair we got the deferral on the merits of the applications - but did tell me a lesson i've never forgotten.
HMRC aren't at all interested in how you got yourself into trouble. They want to see a credible plan for how you're going to get yourself out of trouble.
The two stand out points in the OP's post are that no VAT return was filed in Apr 20, so that suggests that the Jan-Mar quarter's VAT had to be used elsewhere, and that may raise questions as to whether the business's problems pre-dated lockdown in 2020.
The other is that the plan seems to rely on a trading bump over Xmas 2021, whereas the OP says Xmas 2020 was a wash out, and if problems started in the Jan- Mar 20 quarter, perhaps Xmas 2019 wasn't that great either. That affects the credibility of a plan that relies on Xmas 2021 as its salvation.
The two stand out points in the OP's post are that no VAT return was filed in Apr 20, so that suggests that the Jan-Mar quarter's VAT had to be used elsewhere, and that may raise questions as to whether the business's problems pre-dated lockdown in 2020.
The other is that the plan seems to rely on a trading bump over Xmas 2021, whereas the OP says Xmas 2020 was a wash out, and if problems started in the Jan- Mar 20 quarter, perhaps Xmas 2019 wasn't that great either. That affects the credibility of a plan that relies on Xmas 2021 as its salvation.
I owed overdue VAT before (nowhere near the smounts you do, it was circa £5K) and the worst thing you can do is not get intouch with them, I buried my head in the sand and they sent someone round unannounced and basically noted down what equipment i had and told me to arranged a time to pay otherwise they would collect the equipment and sell it.
As it happens the woman in the phone at HMRC was absolutely lovely and gave me 6 months to clear the debt.
Speak to them is my advice
As it happens the woman in the phone at HMRC was absolutely lovely and gave me 6 months to clear the debt.
Speak to them is my advice
fesuvious said:
mybrainhurts said:
Many moons ago, Customs & Excise, as it was then, agreed to an extended payment period with no fuss. Then, out of nowhere, did a U turn, shut the company down, put staff out of work and auctioned the company's assets.
The proceeds covered only 10% of the debt, the auctioneer said he didn't care how much he raised, as long as his fee was achieved.
This was a very small company, the debt was about £8,000 and the delayed payment plan would easily have been achieved.
Utter madness, the debt wasn't paid and the state was lumbered with unemployent benefit for the staff.
Shoot one prisoner in the head without mercy.The proceeds covered only 10% of the debt, the auctioneer said he didn't care how much he raised, as long as his fee was achieved.
This was a very small company, the debt was about £8,000 and the delayed payment plan would easily have been achieved.
Utter madness, the debt wasn't paid and the state was lumbered with unemployent benefit for the staff.
The two hundred watching will be very well behaved for quite a while.
A supplier can simply stop supplying if they don't think they are going to get paid despite all the good promises from the customer who owes them money.
That option isn't open to HMRC so either they let the unpayable debt continue to build up or they kill the business and write off less than they would have done if they had let the problem continue.
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