HMRC - waking the sleeping bear...

I blogged back in November 2010 (here) that HMRC was getting tougher on Time To Pay ("TTP") schemes. An article in Accountancy Age (here) has now backed this up. The article also states that some 75% of companies are now blaming HMRC for their insolvency.

I'm, sorry, but COME ON!! Tax liabilities are exactly the same as trade liabilities - they are a debt that needs to be paid. HMRC is not a bank and doesn't make loans that can be repaid over time: the tax legislation specifically sets out what has to be paid and when. Whilst I have little sympathy for HMRC in that it has abysmally failed in recent years to chase its own (tax due) debts, I also have little sympathy for companies who do not provide suffucient cash to pay their tax liabilities as they are legally obliged to and "blame" HMRC for their insolvency troubles.

When times are tough, HMRC has traditionally been given the lowest priority for paying a debt ("it's the Govrnment, they can afford for me not to pay them"). However, following the banking crises and the current recession etc, the Government can't afford for you not to pay them. They are simply now acting as any other trade creditor has and are exercising decent credit control by trying to collect in their debts! I'm not pro-HMRC, but only a little common sense needs to be apllied to understand what they are doing...

HMRC is generally not unreasonable if you are having difficulty paying a tax debt, just like any other trade creditor, and will still listen to proposals for reasonable TTP schemes. However, you can only expect to get one chance to agree and stick to a TTP scheme. If you go back for another bite of the cherry, don't be surprised if you get refused. If you don't pay the tax due, HMRC cannot withold supplies from you as a trade creditor might be able to unless you pay them, as its debt arises from the activities of a business (e.g. PAYE, NIC, Corporation Tax etc) and can only be collected after the fact. Their only real remedy for absolute non-payment is formal insolvency proceedings and issuing a petition for a winding-up order against the debtor company.

HMRC is like the sleeping bear - it takes a lot to wake it up but once it's awake there's not a lot you can do to stop it from chasing you! Before the bear is awake, take advice from your accountant, or better still an Insolvency Practitioner, and wake the bear gently with a pot of honey (i.e. how you're going to pay the tax) to soften its temper! Better still, make provision for paying the tax and don't wake it up at all!!