For those businesses and individuals that are experiencing difficulties in paying their tax bills in full and on time there is HMRC’s Business Payment Support Service (BPSS) with whom they can negotiate extra time to pay the debt off.
The list of information that is required by the BPSS before a decision can be made as to whether or not to allow additional time is increasing. Owner managed companies are being asked for details of directors personal assets and credit card facilities, with the inference being that they should personally meet their company’s debt.
Lately, the BPSS have imposed a dividend restriction condition. If a dividend has been paid between the company’s year end and the due date for corporation tax, then the BPSS is refusing to grant a time to pay arrangement. Instead the company gets a call from the higher level HMRC Support Team within four days to discuss the matter.
Such a restriction on dividends could make matters worse for company’s and their directors who are dependant on declaring a dividend to clear overdrawn loan accounts. If a loan account is not repaid within nine months after the end of the accounting period in which it arose then the company is liable to pay 25% tax on the loan. Furthermore, the director may also be liable to tax on a benefit-in-kind.
Companies with a tax debt over £1M are required to provide an Independent Business Review (IBR) at their own expense. The IBR can only be compiled by an accountancy firm that is on the HMRC approved panel. This panel consists of big national firms with the likes of PWC, KPMG and Grant Thornton amongst their number, so the cost of an IBR will not come cheap.