HMRC change RTI goalposts

What If You Can’t Pay Your VAT?

Ray Stewart Business, Tax Matters Leave a Comment

Hector is coming!

This is a question that has come up several times recently. Now the 20% rate has been with us for a while, small businesses are finding it harder and harder to meet their quarterly obligations. The trouble is that cash flow is hard work now and many small businesses are finding the VAT is getting swallowed up in day to day trading.

The answer is simple to say but very difficult to do – I can tell you this from experience.   You really need to [private_basic]transfer some cash each week or month into a deposit account so it ring fences the money and it doesn’t “disappear” without trace.

However, not everyone has the discipline or more usually, the ability, to keep such large sums of money out of the business so what happens when the VAT Return has been filed and the direct debit for the VAT is bounced by the Bank due to lack of available funds?

The first thing is not to panic.  In the olden days the failure to pay VAT on the due date would run a business into instant penalties and little option other than to take cash or a bank draft to the local VAT office as settlement.  Failure to do this within a short time led to a visit from the bailiff and lots of trouble for all concerned.

In the current climate – despite ridiculous claims that the recession is over and everything is hunky dory by our government – I am pleased to report that HMRC are taking a realistic approach to businesses in trouble.  They seem to appreciate the cash flow realities of small businesses and are taking a sensible approach to small businesses experiencing cash problems.

So, if you are having trouble paying your VAT, or are going to be come the 12th September when the next batch of direct debits will hit business bank accounts, talk to HMRC Debt Management people.  Their phone number is 0845 302 0136 and their address is:-

HMRC Debt Management & Banking
2nd floor Queens Moat House
22 St Edwards Way
Romford
Essex
RM1 4LQ

When you speak to them you need to have worked out a plan of payments to offer.  They will also expect you to keep other obligations such as PAYE up to date as well as make sure (and yes they know it is easily said!) you keep future VAT payments up to date.

This sort of arrangement cannot keep a business that is no longer viable afloat and shouldn’t be used in those cases.  But it can give a vital breathing space for most small businesses that are solid, but having to give customers longer and longer to pay up.  I have recently seen arrangements up to 6 months so HMRC are really trying to give as much help as they can.

Just don’t rush into any arrangement without looking long and hard at your business prospects though.  Everyone would rather see a longer payment schedule that completes successfully than one that fails at the first payment and leaves HMRC little choice but send in the heavy mob to limit their losses when things go bad.

The moral then is not to panic if the bank bounces your VAT payment.  Just talk to HMRC after chatting with your accountant and arrive at a workable solution.  Don’t adopt the “Ostrich” approach. The direct debit will not be applied for again so you need to take action as soon as possible.

If you would like to talk through any worries or issues you face regarding your VAT payments, please do not hesitate to call me free on 0800 047 0731 immediately for a no obligation chat.

~Ray[/private_basic]

Ray Stewart
I am a qualified Certified Practising Accountant having passed my final exams way back in 1981. I actually can’t believe that was 37 years ago!! Anyway, I am now in my 60’s and I have been running my own business since May 1983. And before you ask, no, I have never regretted a moment of it! Part of the membership requirements of my professional body now dictate that I spend quite a lot of time on “CPD” - continuing professional education (one of their better ideas) - and over the last two years I decided to study business growth and marketing. I have learnt such a lot and that knowledge has radically changed my old “accountants” approach to business. It has made such a difference to the way I work and operate I feel that I just have to pass on this knowledge. It is simply too powerful to hold back!! - but I will try and do it in simple terms rather than expecting you to spend hours, as I had to, working through the difficult language that trainers seem to use to pass on their concepts. I hope you find the blog a useful resource and interesting place to visit as the months pass. I will do my best to keep up the flow - but if there are any topics you would like me to cover, then please let me know. Ray Stewart
Ray Stewart
Ray Stewart

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