Hello,
I have a client who registered for VAT (15 months late) in September 2009 and has yet to submit a single VAT return / payment along with being behind with his SA tax.
Understandably HMRC are now getting seriously annoyed and have sent bankruptcy letters thretening such action if immediate payment is not paid.
HMRC have made VAT best assessments (which are way too low) and obviously do not take account of the pre-registration liabilities!
The client simply cannot pay this, and is looking for some kind of arrangement.
The amounts involved are as follows;
Pre reg: £45k
Post reg (to March 2011) £27k
Projected quarterly liability £9k (average over year)
I have advised him that he needs to get together some cash to make a lump sum payment if he is going to have any chance of a payment deal for the balance but nowadays even this seems in doubt as HMRC currently seem to be taking a very tough stance over non-payment.
If a payment proposal is made where the taxpayer pays a lump sum of say £15k and £1.5k per week for the next 18 months to clear his existing and estimated ongoing liabilities - Do you think this could be accpetable?
If not, has anybody got any ideas on what may be an acceptable proposal.
We all know that this client has brought on this situation, but I am still professionaly obliged to try and help him!
Thanks,
Replies (9)
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Why can't he afford to pay?
This is the question you need to get an answer to if you are to have a hope of making arrangements with HMRC. He has received the VAT on sales and should have known that it wasn't all his to keep. HMRC are going to want to know where that money has gone. Unless it is something largely outside the client's control, such as a temporary down-turn where he used the money to maintian payroll in expectation of future work. they are unlikely to have much sympathy. Even if he can demonstrate that, his complete failure in compliance is likely to count against him. Why should HMRC trust your client will keep up an arrangement to pay if he can't even meet his statutory duty to submit returns?
I appreciate you feel professionally obliged to help, but some people are beyond helping.
VAT payment terms
The feedback I have heard is that HMRC went through a phase a year or so ago being quite flexible on payment plans, but that flexibility seems to have disappeared entirely in recent months.
Acceptable proposal?
That very much depends on the mood of the Officer that you speak to. I think it highly unlikely that 18 months would be acceptable. The 'standard' opening position of HMRC these days seems to be 3 months - though it is usually possible to reach agreement on 6 or 9 months, or even 12. Very occasionally, longer, but your client has done himself no favours whatsoever. HMRC would be much more likely to be amenable if his compliance record had otherwise been up to date - even if unable to pay, he ought to have been filing his returns.
And, as noted in the first response - the VAT element of your client's income was never his. HMRC take a dim view of taxpayers spending what has always rightfully belonged to HMRC. Tax due out of profits/income is another matter.
No harm in asking
I think you will struggle to get those payment terms. As has been mentioned the time to pay arrangements have become much stricter recently.
However, you can only ask and start off some kind of negotiation. Presumably an inspectors/ inspection has taken place and you may have a direct contact who may be more sympathetic and approachable.
Totally agree with it being the clients fault but doesn't mean we can't try to help them as much as possible.
Charged up front
I hope you and the bookkeeper have got payment in advance for this work!
If I were the HMRC (and thank the Lord I'm not)
I would be saying that he should be able to settle this in the time it takes him to re-finance from a commercial lender. HMRC shouldnt be in the position of providing long term finance to refurbish restaurants, so he should go back to the bank with the projections you have prepared showing net profit of £1500/week (after tax rememember) and see if he can finance a loan on the back of that, then pay off HMRC straightaway and the bank over x years ( which is probably longer than HMRC would or should give him.
Hally 993
Prepare and get your client to approve the return you can asap.
Show willing and apologise profusely for late submission etc etc. and then write to HMRC stating exactly as you have said in your post about bankrupcy and the likely consequences. You then have a good bargaining position and fight your client's corner vigorously.
HMRC are not giving sufficient time to pay, but your client has not helped him/herself either, so must now show some willing to get the info in quickly.
Be persistent, be prepared to submit cashflow calcs that to show your client's position. Oh and make sure s/he pays you up front for the considerable time this will take you to negotiate and sort out.
Good luck.