Tax and vat bills ..

TOTHETEETH

Have just had a tax inspection and am face with £20000 bill , all my own fault and have held my hands up it is mostly for VAT (£16000) but buisness has been really bad and im barely getting the bills paid. I have absolutely no assets and geniunly cannot pay , really dont want to go bankrupt , any advice would be helpful the HRMC want it soon , house in neg equity also . i could pay it of but would take 10 years hrmc will probably not accept that ..

BoGoF

In all honesty bankruptcy may be the best (and only) option.

TOTHETEETH

thanks , really didnt want to go down that route i want to pay my bills surely they would want some payment as opposed to nothing, what about an IVA is that a possibility?

GAH

You might be better off posting this thread on the Tax Board, you may get some better advice there.

DS4215

Realistically you are not getting the bills paid if you have not been paying the correct Tax, but you can either ask them if they will allow you to repay over a period of time or you have to bring in some more money sharpish. You don't say what your business does, but you do have any scope to get more customers or can you find a part time job to bring more cash in around it?

BoGoF

You haven't said which tax years these relate to but you are aware further interest will accrue if any offer to pay in instalments is accepted, meaning a 10 year agreement may turn into 15 years.

Are you a sole trader or Ltd company?

TOTHETEETH

I'm a sole trader, a victim of the recession an electrician , have been paying the bills just but it's tight, but this tax bill has thrown a spanner in the works, I have also just taken a part time job too, but HRMC are quite aggressive looking for their money.i just couldn't cope with bankruptcy the mental health couldn't cope with the shame.
I don't mind if it takes 15 years but don't know if they will let me, which seems strange as if they bankrupt me they will get very little.
This is tax and vat from 2009

blinko

just out of curiosity how did you manage to end uip with a 16,000 VAT bill short fall

BoGoF

TOTHETEETH wrote: »

I'm a sole trader, a victim of the recession an electrician , have been paying the bills just but it's tight, but this tax bill has thrown a spanner in the works, I have also just taken a part time job too, but HRMC are quite aggressive looking for their money.i just couldn't cope with bankruptcy the mental health couldn't cope with the shame.
I don't mind if it takes 15 years but don't know if they will let me, which seems strange as if they bankrupt me they will get very little.
This is tax and vat from 2009

To be frank how do you expect them to be after fiddling them out of £20k? The shame of that should be more than the shame of bankruptcy.

TOTHETEETH

Claiming VAT on a vehicle which which I assumed would be allowed but isn't apparently was a big part of it. And to bogof there were accounting errors not fiddling no need to be so pious.

JasonLVC

TOTHETEETH wrote: »

Claiming VAT on a vehicle which which I assumed would be allowed but isn't apparently was a big part of it. And to bogof there were accounting errors not fiddling no need to be so pious.

I assume the vehicle you claimed the VAT on was not a commercial vehicle (van/pick up) but an ordinary car. If the VAT assessment is made up mostly of that, I assume you purchased some sort of range rover/high end type vehicle?

If that is the case then HMRC are right, you cannot claim VAT on an ordinary car, even where it is used for business purposes. There is some case law where it can be argued in the taxpayers favour, but never where the business is a sole trader, as you are.

In terms of doing a deal, HMRC's top priority is to "protect the Revenue" and so by not chasing the £20k, they'd be breaching their own basis for existing, however, you may be able to seek a time to pay arrangement over say 12-18 months. They will certainly not agree to a 10+ year repayment deal, they are not a bank lending you money you owe them already. They will want a short repayment period or else the risks of not getting paid increases greatly for them which will then conflict with their role to protect the revenue again.

They're unlikely to stretch it beyond 12-24 months becuase if you tell them "business is bad and you've little income coming in", then really what you're saying to HMRC is that you're never going to pay this money back and so you'll force HMRC to go down the bankruptcy route. HMRC would rather expedite the matter rather than be drip fed £10 a week for 20 years.....and yes, I've seen it happen loads over the last 18 months....HMRC would rather bankrupt someone and get nothing, than get a few quid a week.

HMRC can assess your personal assets and decide whether you are worth pursuing. They cannot take your tools of trade ordinarily, nor would they seek to take your home. They are unlikely to allow you to go down the IVA route as if HMRC are the only one you owe money to, they are unlikely to agree to a deal.

If your turnover is so low, then you probably can de-register for VAT now so at least future income will be without the VAT headache and may make you cheaper than your rivals in the market place which may see more business come your way.

You say you have no assets and yet at some point you acquired a car where you reclaimed a large chunk of VAT, can that be sold to free up some funds to get HMRC off your back?

You really need to be speaking to a professional on this, if you bury your head or hope it'll go away, it will not. HMRC will then be in control and will dictate the terms, you need to get some advice and grasp the nettle and lay down a reasonable offer to HMRC and see what happens.

....and best of luck, I'm seeing a lot of struggling business at the moment, it is tough out there.