How to deal with letters from HMRC

Small business that don't comply with HMRC may receive letters - here are a few examples. There are many considerations and duties a small business owner faces, and some which are more burdensome that others. The issue of compliance with HMRC regarding tax, VAT and other matters dealt with by the Revenue form a significant proportion of these duties and must be taken seriously. For businesses that aren’t following the rules, they will receive letters from HMRC – and that can be worrying for business owners.

If it gets to this stage, it is important to act quickly but not panic. Here are some examples of the letters from HMRC that a small business might receive.

  • Surcharge notices – where tax or VAT not paid on time, HMRC can impose a surcharge. Sometimes, late payment can arise from not checking the amount of time the payment method could take to clear, so it is always worth double checking this to ensure the payment can be made in good time and prevent a late surcharge. In this instance, prevention is certainly better than cure.
  • Missed filing deadlines – this applies to all types of tax returns whether self-assessment, corporation or VAT. Particularly in the case of VAT, HMRC takes a dim view of late payment as the business will have collected the tax due from customers, and should make this available on time to HMRC. If the payment deadline is missed, HMRC may issue a 12 month notice that if it happens again, a surcharge will be levied. Ensuring knowledge of filing deadlines, or working with an accountant to ensure these are up to date, is advisable.
  • Notice of gross payment status being withdrawn for contractors – if a firm is not up to date on any tax payment owed, this can potentially be withdrawn, which can cause cash flow problems for the business – so it important to keep on top of payment deadlines.
  • Tax investigations – in this instance, both the agent and client are copied into the letter. What is important is to act quickly, as the penalty if any errors are found is reduced with co-operation.
  • Auto-enrolment – whilst this isn’t HMRC, is it mandatory, and therefore action needs to be taken if a business receives letters from the pensions regulator, as there are fines for non-compliance. Further information on auto-enrolment duties and staging dates can be found at this government website

In the case of a business struggling to pay tax and getting letters from HMRC, is it important to open a dialogue with them as soon as possible to help resolve the issues. Once a debt goes to the debt management unit, it is much harder to negotiate a payment plan. In addition, if a plan is agreed and not adhered to, HMRC will be reluctant to allow a payment plan in future.

As with any major business development, it is wise to seek advice from an accountant, who can help with approaching HMRC in the right way and seeking a viable solution to help the business owner meet their duties and keep HMRC from taking further action.