How to Deal with HMRC arrears

hmrc-logoWe see a lot of businesses that have HMRC arrears and we are able to work with them in several ways. The key is being proactive rather than waiting for HMRC to make the decisions for you.

Avoiding HMRC arrears

By proper forecasting and planning HMRC arrears for VAT and corporation tax can be avoided. A cash flow forecast will help immensely with this so please feel free to download and use our free cash flow forecast template.

This may all seem a bit late if you already have HMRC arrears but it is equally important in finding a solution. Unless we understand the real reason for the arrears it is hard to find the right solution. We need to understand whether it is just a lack of working capital, whether short term losses have caused the shortfall or whether there is a more serious problem to address.

Potential solutions

Depending on the cause of the VAT or corporation tax arrears we can help in several ways:

Identify the real cause of the arrears – these may already be glaringly apparent but if need be we are happy to work with you to find out the real reason for the arrears. A simple one day business review will allow us to identify the real issues and suggest possible solutions.

Working capital solutions – we can source suitable working capital solutions for your business. This can include factoring, invoice discounting and asset refinance. Invoice finance will allow you to release cash from your outstanding invoices while asset refinance will allow you to secure a loan against assets you already own.

As well as sourcing suitable finance facilities we can help show how your cash flow will look going forward with the new facility in place. An invoice finance facility will not attract a monthly repayment although there are obviously monthly costs involved. Asset refinance will attract a monthly repayment which will need to be met. The impact on your cash flow is important to understand.

Negotiations with HMRC

When approaching HMRC it is important to fully understand your position. This means understanding:

  • Why the arrears have accrued.
  • What your options are in terms of raising finance?
  • Is the business viable in the long term?
  • How much can you afford to repay and over what period?

If you are entering into a formal ‘Time to Pay Agreement’ it is important that you can meet that repayment plan with ease for the duration of the agreement. We see far too many businesses that are pressured into monthly repayments that are destined to fail. Once you have failed with a repayment plan it is very difficult to negotiate a new one and your financing options will be severely limited. In view of this proper planning and realistic forecasting is very important. This is no time to have your head in the sand.

Restructuring – the formal approach to rescue the business

If we have looked at the finance options and the time to pay arrangement it may be glaringly obvious that the mountain of arrears is insurmountable. In instances like ths9i we may look to save ‘the business’ by using a formal restricting technique. That may mean restructuring the debts of the business in a formal manner to ensure survival or by restructuring the company so that the trading business can be saved and jobs protected.

You must act as soon as possible

The quicker you act and take the ‘bull by the horns’ the better. Explore and understand all your options in full so that you can make a timely and informed decision. Contact the team at Funding Solutions today on 0845 251 4040.

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