What to Do If You Can’t Pay Your Taxes

Accountants save you a lot of money on tax because they understand which reliefs you are entitled to or which expenses you can claim for. But what can you do if you don’t have enough money to pay your taxes even after your accountant has thoroughly worked on your numbers?

 

In this article, the Panthera team will explain what you can do to get extra time to pay and why you should definitely tell HMRC about any difficulties you are having.

 

Contact your accountant

 

Many self-employed people don’t take full advantage of all of the reliefs and benefits that are available to them because they try to do it all themselves. It’s understandable. If you do your own books, how can you be expected to know every nuance of tax law that will result in you saving money?

 

This is where an accountant will come in. They can trim the fat off your tax bill saving you money and making sure you aren’t paying more than you need to.

 

The sooner you get an accountant involved in your business, the sooner you’ll be on top of all things tax and financial.

 

Contact HMRC

 

If missing a tax payment is unavoidable and the deadline is looming, then you’re going to have to tell HMRC about it. Before contacting HMRC, make sure that you have the following information ready:

 

• Your reference number (such as your VAT reference number),
• The amount of your tax bill that you cannot pay,
• The steps you’ve taken to try and pay the bill,
• How much you can pay immediately and how long it will take to gather the rest of the payment,
• Your bank account details/your business’ bank details.

 

Create a payment proposal

 

When you contact HMRC, they will most likely ask you a lot of questions - about your income, your expenditure, your assets, and whether you’ve approached a finance company to take a loan out to pay the bill.

 

The reason we advise that you contact HMRC as soon as possible is because this will give you more time to create a payment plan – you may have heard this referred to as “Time To Pay”. It is possible to reach an agreement with HMRC to pay back the owed tax in instalments over an extended period of time.

 

You will have to agree set dates that you can make the payments on. HMRC will insist that you make the payments by direct debit. It is also worth mentioning that you will have to pay interest on the amounts that you owe. For this reason, it is for the best that you pay back the amount you owe as soon as possible to avoid additional interest building up.

 

When you won’t get more time to pay

 

If HMRC believe that you still won’t be able to make the payments even if they give you an extended time to pay, then they won’t agree to give you more time to pay. It’s as simple as that.

 

You will have a better chance of negotiating additional time to pay if this is only the first or second time that you have failed to make a tax payment. However, if the taxman deems you to be a “repeat offender” then the chances are that you will be forced to pay the entire bill by the due date (or straight away if the bill is overdue).

 

Don’t ignore your bill

 

As worrying as it is, it’s best to confront the situation and work with the taxman. HMRC have a lot of options when it comes to collecting what they are “owed”. They can take a portion of your earnings, delve into your pension, and even repossess your property.

 

HMRC has the power to declare your company insolvent as well as being able to shut down your company entirely.

 

An ounce of prevention is worth a pound of the cure

 

So what can be done? Work with an accountant. If you think you’re going to struggle, speak to your accountant. Accountants like Panthera deal with HMRC on a daily basis and we’re familiar with the way they work.

 

Call us on 01235 768 561 or drop us an email to enquiries@pantheraaccounting.com – we’ll be back in touch with you shortly.