What is the HMRC’s ruling on collecting debts

Nearly every single business in every industry has had their cash flow and businesses interrupted over this year. From having to furlough staff to having entire supply chains disrupted. It’s a difficult time for businesses of all sizes. This has led to a major disruption in cash flow with a lot of businesses now not being able to pay their bills. This in turn has led to a major feeling of anxiety in a lot of business owners heads with many asking the question what’s the latest ruling from HMRC on collecting debts?

 

Well to clear everything up for you and to hopefully put your mind at rest, today we are going to look at the latest updates from HMRC when it comes to collecting debts from businesses and also from customers. You may find yourself in the position whereby your cash flow has been disrupted not from a lack of sales but instead a lack of payments from jobs that have been invoiced already.

 

In the same way that the pandemic and its disruption can’t be blamed on the business, it also can’t be blamed on the customer. It’s for this reason that HMRC has taken the stance to encourage both parties to arrange what is called a ‘Time To Pay’ or TTP agreement, taking into account the circumstances surrounding the current global climate.

 

If you’re looking to set up a TTP with an individual customer they advise you to:-

 

  • Understand the customer’s financial situation
  • Forecast if their situation is to improve or deteriorate
  • Work out how much time they need to pay
  • There is no limit currently on how long a customer can take to pay but HMRC again do encourage customers in this position to pay their debt off as soon as possible.

 

Concerning businesses with tax debts they also advise the following:-

 

  • Similar to the conversation you would have had with a customer as above, HMRC will sit down and discuss your businesses financial position, understanding that business situations can be a lot more complex.
  • They will calculate what they see as viable and reasonable for your business to pay back monthly.
  • The TTP arrangement will continue to be reviewed as time goes on and circumstances within the business change.

 

If you have found yourself in the unfortunate position of needing to know this information. Firstly, don’t feel alone. You along with many other businesses are finding yourself in this scenario through no fault of your own. Secondly, burying your head in the sand and not dealing with it head-on won’t help. If you want some independent advice on the next steps your business should take don’t hesitate to get in touch with a member of the team here at D&K Accounting.

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