02/03/2015

By Chris Weston, Director of Aston Black Accountants in Milton Keynes UK.


In past years, inspectors at Her Majesty’s Revenue & Customs (HMRC) had a considerable amount of discretion when it came to helping taxpayers who have run into difficulties paying VAT or PAYE.

However, today is has become much more difficult to reach conclusions because inspectors have been stripped of authority to resolve conflicts. This has made it much more challenging for small businesses to work with HMRC to resolve tax problems.

Receiving threatening letters from HMRC can create a significant amount of stress for any business owner. It is important to know that it is possible to negotiate with HMRC, payment plans can be installed and debts can be minimised.

Here are a few helpful tips to implement if you find the need for your business to begin negotiating with HMRC over tax debt.

Begin by arranging a longer period to clear your debt.

The first step in arranging a longer period to clear your debt is to schedule a face-to-face meeting or possibly a phone call. If you meet face-to-face, be sure to prepare and bring any documents you’ll need, such as any forms related to the tax debt, and any proof of extenuating circumstances. As always, remember that appearing polite and well-dressed will help make a good impression and set the tone for a productive meetings.

Work out a payment plan.

It’s best to sort out a payment arrangement for any debt that you do owe. This is by far the easiest option for everyone. First, agree upon how much tax is owed, and then discuss over what period of time you can reasonably pay it. Remember to factor in future tax payments and any other future financial concerns in calculating how long you’ll need the payment plan to extend.

Go into the face-to-face meeting with a well thought out proposal for your payment plan.

If the amount of tax debt you have is unclear due to an error on HMRC’s part, bring that up. If they’ve made an error, you will not be held accountable for its reconciliation and they should exonerate you of that debt. Be sure to provide documentation to illustrate the discrepancy.

Enter into negotiations.

If for some reason arranging a payment plan is not an option, then you will likely enter into negotiations.

Be prepared to answer a range of questions about your business, including sharing past financial statements, your past tax debt and history of any payments made. But also keep in mind that it is well within your rights, and sometimes your best interest, not to disclose more information than is being requested. It’s important to understand what is being requested and provide complete, accurate information to that point.

No two businesses are alike, and in order to ensure that tax collectors treat each organisation fairly, there are manuals which tax collectors must use. HMRC is only able to act based on the information they are given and the current protocol in place, so be sure not to withhold important facts in order to give HMRC the best opportunity to resolve the tax payment negotiation as fairly as possible.