It is vital that a company keeps up with PAYE, VAT, and National Insurance payments to HMRC. When cash flow problems strike it can be tempting to delay these payments and invest in advertising and marketing instead, in a bid to try and improve revenue.
However, falling behind means that HMRC may take further action, including forcing a winding-up petition on your organisation or sending enforcement officers to confiscate company assets.
No matter how far behind you are in payments, however, there may be a solution to avoid legal action. As long as you can show that your company is able to continue as an ongoing an profitable concern, then you may not need to enter administration or sell all of your assets.
Missing payments and owing money to HMRC should be avoided at all costs. Initially, you will receive reminders that you owe money, but eventually these reminders will be replaced by demands, and may culminate in a visit from enforcement officers. Enforcement officers have the power to seize company assets, and HMRC has the power to force a company into administration if they believe that you are insolvent and unable to pay off debts.
Arranging Time To Pay
In most cases, where it can be shown that a cash flow problem is only a short-term concern, it will be possible to arrange a Time To Pay (TTP) arrangement with HMRC. They typically require that you agree to repay the full amount owed over a period of between 6 and 12 months, and you must agree to meet any and all future tax payments. In some cases, it is possible to negotiate a longer TTP period, and although your chances will be reduced if you have missed previous TTP arrangements, there may still be a chance to negotiate ongoing payments.
Negotiating A Company Voluntary Arrangement
If a TTP fails, there are other options and possible courses of action to consider. Using expert insolvency practitioners (IP), you can enter into a Company Voluntary Arrangement (CVA). This is essentially a debt restructuring deal. Your IP will work with you to determine the true extent of your debts, and will then negotiate with creditors on your behalf.
Ultimately, the aim of a CVA will be to pay off as much of the debt as possible over three to five years so that the remainder is written off. This may mean strict financial terms for a period of five years, but it could also mean that your business will ultimately survive, or that you have the opportunity to repay creditors without putting your company into administration.
Entering Into Administration
Manchester insolvency practitioners can also work with you to enter into company administration. If financial terms for a CVA cannot be agreed with creditors, and if HMRC has refused your pleas for a TTP arrangement, then administration may be the only remaining, viable option. An IP is appointed as administrator for the company, and they work to orchestrate a financial recovery, or to wind company proceedings up.
Take Action Today
Unfortunately, some companies do fail, and even those with a long trading history and a seemingly healthy order pipeline can hit cash flow difficulties. Falling behind with payments to HMRC could spell the beginning of the end, but if your organisation is still profitable or there is a way out of the cash flow problems that you are currently suffering, then there is still hope. It is important that you take action straight away, whether it is to negotiate with HMRC yourself, or to appoint insolvency practitioners that can negotiate with creditors on your behalf.
By Adam Johnson
Adam has been advising small businesses for many years now. An avid writer, he enjoys posting his experiences and insights online. You can read his articles on many business and finance blogs and websites.