Construction giant Carillion has gone into liquidation. Its reported 30,000 sub-contractors are likely to receive nothing from the Official Receiver and might now find themselves in financial difficulties. Payments of VAT, payroll taxes and corporation tax must still be made, which can be difficult to fund when an important large customer has failed.
Help with time to pay
HMRC has indicated that it will provide practical help and advice to those affected, promising to agree instalment payment arrangements, suspend debt collection and/or to reduce payments on account. It has said, however, that any agreement to defer payments must relate to ‘short-term cash flow difficulties’.
The Business Payment Support Service (BPSS) was launched at the time of the 2008 recession, but recent tales abound of mixed responses to requests for tax payment deferrals, which seem to depend on the attitude of the individual officer you get to speak to and whether or not this is your ‘first offence’. You might agree a payment plan quickly and easily, or you might be asked to produce accounts, cash flow forecasts and written confirmation from your bank that they will not lend you any more money (albeit much will depend on the quantum of liability you are seeking to defer and for how long).
If your business incurs a loss this year, you will be able to carry that loss back to reduce the tax you owe for last year. Such a claim cannot formally be made, however, until you file this year’s tax return and in the meantime last year’s tax remains payable. If you can provide management accounts or other evidence of the extent of the likely loss, HMRC might agree to suspend collection of some or all of last year’s tax, but you will still be charged interest on any amounts that were not paid when they should have been.
The crucial point here is to contact HMRC at the earliest opportunity, and preferably in advance of the due date for payment. As time goes on, it might get more difficult to obtain generous time to pay agreements, so you should not wait for the debt recovery team to knock on the door. These people must hear ‘sob stories’ every day, so you can understand if they appear to be unsympathetic if you wait until the last minute before seeking time to pay.
RSM’s Restructuring Advisory team is well-versed in finding alternative finance in these situations - which can complement existing facilities on a short-term basis - giving businesses time to obtain VAT bad debt relief, claim corporation tax loss relief and get their tax affairs back on an even keel.
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