For many businesses the Coronavirus pandemic is still having an impact. Across the UK there will be many business owners worrying about how they are going to pay their tax bills. So what can you do if you’re in this situation?

As bookkeepers we always advise our clients to save for a rainy day and set money aside for your tax bill. This is, of course, easier said than done. We know the unexpected can happen and covid hasn’t helped the situation for small businesses.

If you are unable to pay your tax bill you must contact HMRC and advise them of this. They will ask you some questions about why you can’t pay and discuss your options with you.

HMRC has introduced the ‘Time to pay arrangement’. You may be able to do this online if;

  • You have already submitted your latest tax return
  • The amount you owe is less than £30,000
  • Are within 60 days of the payment deadline
  • Commit to pay your debt off within the next 12 months or before

If you don’t meet the above criteria then you must get in touch with HMRC by calling 0300 200 3822 Monday- Friday 8am-4pm.

What information will I need to apply?

  • You will need your UTR code (Unique Tax Reference)
  • Your VAT number if applicable
  • Your bank details
  • Details of any payments you have missed (if applicable)

What will I be asked?

  • How much you can afford to pay each month
  • The reason you can’t pay the amount in full
  • If there are any other outstanding tax bills you need to pay
  • Your earnings
  • Your outgoings
  • What savings or investments you have

HMRC will expect you to use any savings or assets you have in order to pay your outstanding tax bill.

How will HMRC decide what my payments are?

HMRC will consider your income and outgoings and will expect you to pay half of what you have left each month. It’s important to note that by using the time to pay scheme you will be charged interest so it’s better for you to pay what you owe as soon as possible.

What if I already owe tax?

You will need to contact HMRC as you will not be eligible to apply for the time to pay scheme online. HMRC will ask you to make a proposal of how much you can afford to pay and agree a date your debt will be settled. They will then ask you a number of questions about your proposal to confirm whether or not it is a possibility.

HMRC will ask you to reduce your debts as much as possible before they will allow you to enter into the payment arrangement. You will be expected to use personal funds, take out a loan or extend existing credit in order to reduce what you owe as much as possible. More often than not they ask that you pay at least half of your bill before allowing you to enter into the arrangement.

Going forward it’s important to save as much money as possible in order to cover your tax bill so that you don’t have to pay penalty charges and interest. HMRC have extended the deadline to 28th February 2022 to file and pay your tax return if 31st January is not realistic for you. By doing this they have waivered the late penalty fee but you will still be charged interest until the day you pay. We strongly advise filing your tax return as soon as possible so that you know how much you are expected to pay and there are no unexpected surprises.

For further advice please contact HMRC.

If you need support with your next tax bill then please get in touch.