Seizing of assets to clear HMRC debts on the rise
Paying tax bills on time is an important task and duty for businesses of all sizes, to avoid HMRC debts and penalties for late payment. However, for those businesses that have overdue debts that have not been settled, seizing of assets by HMRC is a very real possibility.
In fact, a recent report has highlighted that the instances of HMRC exercising the right to seize assets to settle the debts has increased by 145 per cent in the last year. So it is clear that avoidance of HMRC debts should be a priority for all businesses, large and small. Removal of assets that are key to business operations would be a substantial blow to the business and therefore its profitability, that’s without the inconvenience and cost in replacing the asset.
HMRC Debts – act early
Act early to address the situation as soon as possible – don’t let HMRC debts mount. Burying your head in the sand will make things much worse. Speaking to HMRC early can result in a negotiable situation, perhaps resulting in some manageable payment terms. Seek help from your accountant if you find yourself in this position, as your accountant can act on your behalf in terms of stating your case and helping to find a solution.
Funding options for HMRC Debt
Explore funding options – borrowing money to settle a HMRC debt is preferable to losing assets that may be sold for less than the market value and may not even cover the whole debt. Whilst banks have become more stringent with lending criteria, there are a variety of other ways to raise capital, such as through invoice finance. Invoice finance unlocks cash that is owed into the business, as providers of this kind of lending offer the funds up front and then collect the amounts owed in, taking a small fee for their part. There might also be the option to borrow from family or friends, agreeing an interest rate that remunerates their goodwill and gives you access to the necessary funds to clear the HMRC debt. It is advisable to have a formal agreement drawn up.
Cashflow is key for small Business
Prevention is best – of course, not getting into debt with HMRC in the first place is the most sensible course of action. Keeping a close eye on finances and cash flow is key, and is all down to maintaining good accounting records and monitoring and forecasting on a regular basis. Cash flow can be affected by a number of elements, such as late payment. Keep on top of invoicing to ensure that monies owed are paid on time. Confirm receipt of invoice when sending it in, ensure the correct processes have been followed (submitted to the right person and with the right corresponding reference) and follow up both within the payment term period and beyond if the invoice isn’t settled on time. Following a rigorous process here should aid cash flow and ensure funds are available for important outgoings such as tax bills.
Any clients who are worried about a tax bill from HMRC can get in touch for advice on 01827 54944.