GUIDE TO DEALING WITH BUSINESS DEBTS

Transcription

1 GUIDE TO DEALING WITH BUSINESS DEBTS

2 2 A fact sheet about the different debts your business can establish and how to deal with them. Let s Look at Income Tax Debt If you have been left with an income tax debt, then you need to firstly think about you most recent tax return and whether the tax debt was correct. If not you should contact HMRC to discuss correct liability. If you have not yet sent a tax return then the tax debt could be estimated, so you must act fast or you will be sent a "determination". You have no right of appeal against this determination and if you think the figures are wrong you must send in your tax return as soon as possible. You must always send in your tax returns, even if they are late, as you could be changed a penalty fee of 100 for a late return. HMRC can also add interest to your tax debt at a set rate. If they do you may be able to stop interest being added, if you make an arrangement to pay before the interest is due to be added. Collection Income tax collectors have many ways in which they will try to recover the debt that you owe. You must treat any tax debt as a priority and make arrangements to pay as soon as possible. If you are unemployed, provide full details of your situation and ask the collector to hold off any action until you have a regular income coming in again. Bailiffs If the collector decides to use bailiffs to recover the debt then the bailiffs can try to recover goods without getting a court order first. This usually happens when you are trading business, as you may have stock and equipment worth taking, however; here are some goods that cannot be taken, such as basic household goods, things owned by other people and necessary tools of the trade. County Court If the bailiffs cannot recover the debt then you will most likely be taken to court. You will need to fill in the reply form to make the claim, and make an offer to pay in instalments. It is then up to the court to decide whether your offer is reasonable even if the collector wants a higher amount. Interest and Penalties You could be surcharged either if payments are made late, if any forms (.e.g. tax return) are sent late or for making negligent or false returns. Magistrates Court If the debt is less than 2,000 then HMRC will try to recover the debt through the magistrates court. You will receive a summons to go to a hearing; you must ensure that you go. Take all evidence of payments to the hearing, and any information that can support your case; such as your personal budget and proof of your income. You can make a request to the magistrates for

3 3 time to pay the debt back in instalments. If you do not keep up with the payments then the court can issue a Distress Warrant to use private bailiffs. You can also be sent to prison if the court decides you have wilfully refused or neglected to pay. Bankruptcy If you owe more than 750 then you could be taken to court to be declared bankrupt, however; if you do not have any assets they may decide to not make you bankrupt. Complaints If you feel you are being treated unfairly by HMRC, then there is a complaints procedure under the Taxpayer's Charter which you can follow. National Insurance Arrears HMRC National Insurance Contributions Office deal with all contributions for National Insurance. The different classes include: Class 1 Contributions are paid by employees unless the earnings are below a certain limit. Class 2 Contributions are paid by self-employed people as a weekly flat rate unless your earnings are below a certain limit. Class 4 Contributions are paid by self-employed people in addition to class 2 contributions, where your earnings are above the personal tax allowance for the year. This amount changes every year. Class 1, Class 2 and Class 4 National Insurance Contributions are collected by HMRC together with any arrears outstanding. If you are self employed then you should pay class 2, however; if you have fallen behind you can negotiate payment arrangements you can afford. Although HMRC can refuse you offer and you can be taken to court, it will then be left to the courts to decide what you should pay. Gas, Electric and Water Rates Debts For Gas and Electric debts the same powers for recover apply to each. The debts can be transferred to your home account, and your home can be cut off if the debts are not payed; so they must be treated as a priority. For water debts the company can cut you off at your business premises, but not your home! The debts cannot be transferred, however; they can go to county court for a money judgment, so you should try to arrange payment.

4 4 Information on VAT Debts If you believe you have fallen behind with the amount you owe toward VAT you should firstly ensure that all your VAT returns have been sent in. If your VAT bill has been assessed and you disagree with the amount claimed, you can ask for a review within 30 days. Although if your turnover is less than the fixed annual amount, you may be able to de-register for VAT. You must ensure to send your returns in within the correct time period, or they may refuse this. It is possible to come to a short payment arrangement with HMRC for arrears if they know that you are no longer registered for VAT. Penalties and default will still be added to the VAT bill for late payment however. Bailiffs can be used to recover any debts if you do not pay, the usual practice is that they do not break in unless they have already been in and taken goods previously, however; there is a grey area as to whether they can force entry into home. If the bailiffs are unsuccessful and you owe more than 750, then you could be taken to court to be declared bankrupt, however if you do not have any assets they may decide to not make you bankrupt. What about Business Rent Debts!? If you rent you business premises then cease to trade you could still be liable for the rent. Most likely if you have a monthly tenancy, which ran month from month then you should only need to give notice for the required period, and the tenancy should end. However if you have a long term lease this could be a little more tricky. If the lease is over a period of years, then you may be liable for the rent until the lease expires or a new tenant is found. If you are liable for the ongoing rent, you may be able to sublet or "assign" the premises. You can also ask the landlord to surrender the lease, although it is unlikely that they will allow this as they will be liable for business rates whilst the property is empty. If you have been evicted from the premises then the lease will end and you will not be liable for ongoing rent and rates.

5 5 Business Rates If you have stopped trading you must tell the council as soon as possible. You may still be responsible for paying business rates, if you are still leasing premises that are empty You can apply to the council to write off all or part of your business rate arrears; although they have to agree that you would suffer hardship otherwise. You should write to them asking for your business rates to be remitted under Section 49, Local Government Finance Act You need to include reasons why you would suffer hardship by paying it, how you have tried to make the business work and full details of your personal budget. If you do not qualify for the debt to be written off, then the council has a range of powers to recover the debt that is owed. They will send you written notices or could even ask the magistrates' court to make a liability order against you, which will allow the council to try various ways of collecting the debt. The council could also send bailiffs to your business premises or your home. They cannot force their way in unless you have let them in previously; or if you have left a window or door open. You should try to contact the bailiffs and the council and try to negotiate an offer of payment that you can afford. If the council and bailiffs fail to retrieve money from you, then they can take you to court with the possibility of imprisonment. However if you supply the courts with good reasons why you cannot pay, along with proof, they could order all or part of your business rates to be written off in exceptional circumstances, however they are more likely to tell you to pay the arrears off in weekly instalments. What Happens if You Can t Pay Your Accountants Bill? If your account deals with your tax returns and you are not up to date with what you owe them, then they could refuse to complete tax returns or give you back your books. This could cause issues with HMRC, so you must make them aware of your circumstances and try to give them a summary of your trading figure. Try to negotiate with your accountant to give your books back. They may allow you them back if they can see you are in financial hardship.

6 6 Advice Lines for Further Help Business Debtline Phone: Website: Monday - Friday 9.00 am pm. Taxaid Phone: Website: Monday-Thursday am noon. To complain about HM Revenue & Customs, contact: The Adjudicator's Office 6th Floor, Haymarket House 28 Haymarket London SW1Y 4SP Phone: Website:

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