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VAT - Is there really any time being given to pay?

VAT - Is there really any time being given to pay?


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!



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13th Jun 2011 11:45

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.

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13th Jun 2011 11:47

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.


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13th Jun 2011 11:57

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.

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13th Jun 2011 12:02

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.

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13th Jun 2011 12:19

Why can't he afford to pay

It is very difficult to come up with a justifiable reason for not being able to pay apart from he has spent the money!

He undertook a major refurb of his restaurant last summer (low priority in my honest opinion) which cost him £60k!

I fully agree with most of the replies that the taxpayer has spent HMRC's money but I need to be seen to be doing something and hopefully obtain some kind of payment plan for him but I want to avoid suggesting a totally unacceptable plan to either HMRC or the taxpayer.

The other option is to go bankrupt (this client is unfortunately not a company) and the taxpayer does not really have any personal assets (renting and has a car) but he will obiously loose the restaurant (mainly go to the bank) and be left with nothing, and there will be very little left for HMRC!

At least with a proposal, they have a chance of getting something and hopefully everything!

I now have the information to prepare 4 out of 6 O/S returns and will get these done tomorrow, the other 2 may take a few weeks to get the info together (his book-keeper is working through the night!)

Thanks for the feedback.

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13th Jun 2011 12:23

Charged up front

 I hope you and the bookkeeper have got payment in advance for this work!

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13th Jun 2011 12:39

Payment in advance

Yes I have! He is actually in credit with me at the moment!

The book-keeper has just been paid up to date as well.


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13th Jun 2011 12:54

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.



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13th Jun 2011 12:57

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.

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