New PAYE fines being enforced

chrismac1

It's clear I am afraid that the last poster has never run a business - or at least I would happily bet £1,000 at evens that he or she has not. You pay your employees their net pay, that is a cash outflow and often a significant one. There is no cash inflow arising which you can use to pay HMRC, they are just another outflow. Meanwhile the current climate makes it very difficult to borrow money to pay PAYE or VAT. I have a client with a hotel worth £1.4m and under £700k of debts, turned down for an extra £20k of which they wanted to apply £10k to clear VAT and tax bills.

Unless and until I can find a more willing lender for them, my advice to them is simple. Keep paying the wages, keep paying key suppliers, don't pay HMRC unless you can clearly pay them and keep within the bank's financing limits. They will trade their way out of this, they made over £70k profit - hence the big tax bill - but invested over £50k of this in the business, that leaves £15k for 2 people to live off which is not much in my view.

If someone can come up with a better cash flow management strategy I am all ears!

MacMickster

chrismac1 wrote: »

It's clear I am afraid that the last poster has never run a business - or at least I would happily bet £1,000 at evens that he or she has not. You pay your employees their net pay, that is a cash outflow and often a significant one. There is no cash inflow arising which you can use to pay HMRC, they are just another outflow. Meanwhile the current climate makes it very difficult to borrow money to pay PAYE or VAT. I have a client with a hotel worth £1.4m and under £700k of debts, turned down for an extra £20k of which they wanted to apply £10k to clear VAT and tax bills.

Unless and until I can find a more willing lender for them, my advice to them is simple. Keep paying the wages, keep paying key suppliers, don't pay HMRC unless you can clearly pay them and keep within the bank's financing limits. They will trade their way out of this, they made over £70k profit - hence the big tax bill - but invested over £50k of this in the business, that leaves £15k for 2 people to live off which is not much in my view.

If someone can come up with a better cash flow management strategy I am all ears!

You would lose your bet I'm afraid. I ran my own small business for over 20 years. After 5 years I never needed to rely on bank loans or overdrafts again (but had lived a very frugal existence over those first 5 years).

When cash flow was tight then my first step was to put my own money back into the business rather than take money out. If necessary, delaying payment to the tax man was the next step, but this was exceptional as most of this was not my money but money taken from my employees. I budgeted for paying my employees a gross wage - not a net wage.

Unfortunately the OP talks of having delayed payment to the taxman every month for over 30 years - clearly never having got a grip on cashflow throughout this time.

I always regarded delaying any payment as being akin to using a credit card for personal spending without paying it off in full by the due date. Whilst occasionally unavoidable for people due to unforseen circumstances, it is the start of a slippery slope and a sign of poor money management if this becomes a regular occurence.

After over 30 years of trading, if the OP has never been able to get sufficient control of cashflow to make their payments on time the majority of the time then they can hardly complain at the fines that they are now faced with. Perhaps they should have taken less out of the business during those 30+ years.

As for your clients with the hotel, your advice may be correct in the short term (but it depends on the level of fines that HMRC are likely to charge). The best medium-term option is probably for them to raise funds against personal assets and stop taking any money from the business for a while. If they don't get control of their cash flow they will not have a business. It is a sad fact of life that no matter how (potentially) profitable a business is, without control of its cash flow it can't operate - hence the high-profile retail businesses which have entered administration this year because they were unable to pay their rents when due.

chrismac1

I am glad we did not shake hands on the bet!

John_Pierpoint

Unfortunately the whole country is run on deficit financing, the resulting inflation means that it is foolish to pay on time this month if you can get away with paying next month in devalued pounds. or revalued Swiss Francs.

BoGoF

So if your clients are budgeting for paying net wages what would happen if HMRC issued a NT (no tax) coding for an employee, could they afford to pay the 'increased' salary ?

runninglea

It seems a bit random - some companies are getting hit with the fine whilst others who pay similar are not!

Pennywise

runninglea wrote: »

It seems a bit random - some companies are getting hit with the fine whilst others who pay similar are not!

As usual, the easy targets are being hit and others are lost in the usual "too hard" tray.

It's amazing how HMRC are so quick to hassle the generally law abiding business who may be occasional a bit late, but who generally pay in full, on time.

It's equally amazing how some businesses are allowed to owe several months, if not years, worth of PAYE and VAT with apparently very little attention from HMRC. A few months ago a local bakery (just a couple of small corner shops) went into receivership oweing over £100k to HMRC in PAYE and another £100k in VAT (according to the Receiver's statement) - they only have a handful of part time staff and their daily turnover per shop is only a few hundred pounds. It's not difficult to work the figures to prove that this was year's worth of VAT and PAYE - not just a few months. How on earth did HMRC let things get that bad?

For a client of mine, a children's nursery, who owed around £5k in corporation tax, they actually sent in the bailiffs within 3 months of the due date. They had always paid their PAYE on time and previously CT on time, but, for once, they couldn't pay the CT because their quarterly grant (from the govt!) for free child places had been delayed!

Where is the equality? I thought the taxpayers charter required everyone to be treated fairly and equally. Just another instance where HMRC makes up its own rules as it goes along!

chrismac1

That's on the occasions when its staff know its own rules!

Chris-H_2

Does any think its right that i get a fine of over £1900 that includes the last 10 months paye?
I have always made the payment within a couple of days of the due date. I have occasionally received letter saying that late payments MAY attract a fine. but I've assumed that because payment has been made within a matter of a few days after the due date and I'd heard nothing back from HMRC then I had got my payment in within an acceptable time frame.
What they have done is kept quiet for 11 months, then hit me with 4% of the whole of the last 10 months PAYE. If they charged me on the first month, I would have considered my wrists slapped and made payments on time from then on. To wait 11 months, compiling charges without my knowledge seems unreasonable to me.
Each monthly payment of around £5K was lets say 3 days late. So in essence I've borrowed £5K for a total of 30 days. The fine of £1950+ seems very high for this don't you think?

antonic

John_Pierpoint wrote: »

Does anyone have the statistics for the bankruptcies in the business sector created by petition from HMRC as against those created by banks and those created by ordinary trade creditors?

Obviously some organisation has to pull the rug and put the workers of a no hope business on the dole - but I just wonder if the decision is made by a computer at HMRC ?

It will be quite interesting now that more and more of our services are run by PFI (Private Finance Initiative - ie borrowing from our kids) firms, when one of those goes bust - I wonder if they will get special treatment?

Back in the early days of my working life, I would get a new customer on the phone saying "Can we have a delivery of (say in today's money) 20K's worth tomorrow.
I would ascertain the location of the delivery address, in those days before computers, readily available business services (for medium sized businesses); Then I would have to say. I could send enough for you to set up your machinery if you can get a cheque to me by tomorrow morning. We need a bank reference and two trade references.

The most popular trace reference was Imperial Chemical Industries, a reference from ICI was probably meaningless, because they had a reputation for suing if a trader went over his terms. So their monthly statement got paid on time.

The decision is made by a human being who has visited the business and ascertained if the debt can be paid, if the distraint call is unsuccessful. The actual decision to make someone bankrupt/ wind up a company is made by the Enforcement & Insolvency Section in Worthing.