VAT debt

Hefferlump

I am self employed and submit VAT returns quarterly, as required. Although my income is below the VAT threshold figure it is necessary for me to be registered for business reasons. In addition, when I first registered a number of years ago, my income was over the then threshold.
Due to having to take some two months off work in the last six months or so (health problems involving hospitalisation) I find myself unable to pay this quarter's VAT as my income has dropped off a cliff. It is not a vast amount (very low four figures) and I have submitted the return.
On looking at the HMRC site it recommends contacting their Business Payment Support Service
http://www.hmrc.gov.uk/payinghmrc/problems/bpps.htm
On looking at that page it appears that I will have to explain my reasonss, provide all sorts of information, set up a direct debit and stick to the payment plan with the threat of legal action if a payment is missed or part paid.
However a further search around the HMRC site reveals, on the following page
http://www.hmrc.gov.uk/vat/managing/problems/penalties.htm
what would happen if a payment is missed seemingly without advanced notification. This page (and I am very definitely way, way under 150k income) seems to indicate that if I miss the first payment I will get a help letter, the next missed quarter a surcharge letter issued, and no sucharge until the third quatreris missed and so on up to six or more quarters. I do not doubt, for one moment, that the HMRC would never let anyone get to that stage (unless they are a multinational company, possibly!) and would have taken action well before then. However I cannot, for the life of me, see where the advantage is in fronting up to the Business Payment Support Service and explaining my difficulties as opposed to paying what I can now and keep chipping away at the debt.
I am sure I will get posts saying that I owe it so pay it. I don't disagree and will be doing so, but with a disabled partner who cannot claim any benefits as my income is over the £20k threshold , I have to keep a roof over her head. Being whacked onto a payment plan, with the threat of legal action if I miss or make a reduced payment, seems to be considerably less pleasant than simply missing the whole payment but paying what I can and then chipping away at the debt.
Am I wrong in that interpretation of the pages from the HMRC site? Is there any benefit to me in contacting them before the payment is due?

ILW

VAT is other peoples money and should be kept in an "untouchable" separate account and never used for day to day cash flow.

zygurat789

As you have submitted the return HMRC now know how much you owe them and they will chase you ventually sending in bailiffs.
You should not have submitted the return then they would have been in the dark about how much you owed and may have assessed you (protem) for a lesser amount.
Be warned they will charge penalties and surcharges.

chrismac1

The last two posts I hope were a joke. Whilst VAT is indeed other people's money the business is acting as an unpaid tax collector, imagine the strikes there would be at HMRC towers if they had to spend 4 or 5 unpaid hours per month!

You have done the right thing in submitting the return. In the absence of this, HMRC would have "determined" a return. These determinations are typically 150% or so of the maximum VAT return over the previous year or so - in other words, a serious incentive to submit the real numbers!

The benefit of the Time To Pay service, albeit they are more aggressive than when this first came in, is about the long game. If you intend to be in business in two years' time it is worth calling them.

Even if they decline you, make a note of who you spoke to, where they were physcially located, date and time of the call. At the very least in my view this makes it tough for them to argue at a later stage that you have not behaved as a responsible taxpayer.

When and if they eventually get around to physical visits, this can be a very random thing. One of the local folk is a real Rottweiler she looks as hard as nails and the meaning of the word negotiation passed her by at school.

But one of them is completely the opposite, if I didn't know better I'd say he's actually ran a business in the past as he has an insight into this which is very rare in HMRC these days. He negotiates and on average the cash flows to HMRC from the clients he deals with are significantly higher than those the Rottweiler achieves.

antonic

If you find that you wont be able to pay the next return in full on the due date (for example the 04/13 return should be filed and paid by the 7th June) AND to avoid either starting down the Default Surcharge route OR getting a Default Surcharge financial penalty if you are already in the DS Scheme and have had previous warning letters, you MUST contact HMRC before the due date of 7th June if you file online.

The Default Surcharge system works as follows :

Q1 - Help Letter
Q2 - First Default
Q3 - Surcharge Liability Notice
Q4 - Surcharge Liability Notice Extension
Q5 - 2% Default Surcharge (may not be a financial penalty)
Q6 - 5% Default Surcharge (may not be a financial penalty).
Q7 - 10 % Default Surcharge
Q8 - 15% Default Surcharge.

Once you enter the Default Surcharge scheme you then have to file and pay the next 4 consecutive returns on the due date, if you fail to do so you will incur a financial penalty of up to 15%..

The Default Surcharge is calculated on the BOX 5 figure from the return and can either be on the whole amount due OR the balance of any VAT due if a payment has been made before the due date.

HMRC will not agree any repayment agreement while ANY returns are outstanding.

Also if you approach HMRC for a repayment arrangement they will want to know of any other HMRC debts and proof that you have tried everywhere else to obtain funds to pay the bill before approaching them.

Hope this helps.

Hefferlump wrote: »

I am self employed and submit VAT returns quarterly, as required. Although my income is below the VAT threshold figure it is necessary for me to be registered for business reasons. In addition, when I first registered a number of years ago, my income was over the then threshold.
Due to having to take some two months off work in the last six months or so (health problems involving hospitalisation) I find myself unable to pay this quarter's VAT as my income has dropped off a cliff. It is not a vast amount (very low four figures) and I have submitted the return.
On looking at the HMRC site it recommends contacting their Business Payment Support Service
http://www.hmrc.gov.uk/payinghmrc/problems/bpps.htm
On looking at that page it appears that I will have to explain my reasonss, provide all sorts of information, set up a direct debit and stick to the payment plan with the threat of legal action if a payment is missed or part paid.
However a further search around the HMRC site reveals, on the following page
http://www.hmrc.gov.uk/vat/managing/problems/penalties.htm
what would happen if a payment is missed seemingly without advanced notification. This page (and I am very definitely way, way under 150k income) seems to indicate that if I miss the first payment I will get a help letter, the next missed quarter a surcharge letter issued, and no sucharge until the third quatreris missed and so on up to six or more quarters. I do not doubt, for one moment, that the HMRC would never let anyone get to that stage (unless they are a multinational company, possibly!) and would have taken action well before then. However I cannot, for the life of me, see where the advantage is in fronting up to the Business Payment Support Service and explaining my difficulties as opposed to paying what I can now and keep chipping away at the debt.
I am sure I will get posts saying that I owe it so pay it. I don't disagree and will be doing so, but with a disabled partner who cannot claim any benefits as my income is over the £20k threshold , I have to keep a roof over her head. Being whacked onto a payment plan, with the threat of legal action if I miss or make a reduced payment, seems to be considerably less pleasant than simply missing the whole payment but paying what I can and then chipping away at the debt.
Am I wrong in that interpretation of the pages from the HMRC site? Is there any benefit to me in contacting them before the payment is due?

tabbyfish

Calling them is your best option. The default surcharge regime does not stop them trying to collect the debt. It is just there to make people compliant.

Also need to take into account that if you do agree to a time to pay agreement that you must keep all future returns and payments up to date or the agreement can be cancelled.
Luckily there is no interest on VAT unlike other taxes.
If you owe less than £15k your debt would eventually be passed to a debt collection agency who are likely to accept an agreement over a longer period than the VAT man.
Your debt would go through a campaign of letters then a telephone pursuit call then a technical office before being passed for Debt collection. An agreeemnt to pay can be made at any of these points. It is a long process and can be upsetting as the letters are not nice and some of the telephone operators are pretty aggressive.

The best thing to do is call them up before they contact you,explain your circumstances and offer what you can afford, if they say no, make any payments you can in the mean time to reduce the debt and either call them each time you receive a letter making your offer or wait for the debt collection agency to call. They get a cut of the money they collect.

If you owe over £15k and or have assets to off set they may call out to your business.

There are some decent tax collectors out there, I should know ;0) I used to be one.

Good luck with everything

johncarlton76

I would definitely call them and just hope you get to speak to a human being and not someone that is a jobs worth.

I'm certain if you explain that you have had unforeseen outgoings that would have otherwise affected the longevity of your business - they will allow you to repay it over 3 months, interest free..

If you don't ask, you don't get!

If you do call them - don't loose your temper. I find that people with authority always like to win. Play to their egos. Be the victim. They will take pity...

I work in a job where rank and authority is everything.. So I know how people like the vat office work and think.

Kick off with them - and you will always loose..

tabbyfish

johncarlton76 wrote: »

I would definitely call them and just hope you get to speak to a human being and not someone that is a jobs worth.

I'm certain if you explain that you have had unforeseen outgoings that would have otherwise affected the longevity of your business - they will allow you to repay it over 3 months, interest free..

If you don't ask, you don't get!

If you do call them - don't loose your temper. I find that people with authority always like to win. Play to their egos. Be the victim. They will take pity...

I work in a job where rank and authority is everything.. So I know how people like the vat office work and think.

Kick off with them - and you will always loose..

Good advice. There are lots that are nice and the Business payment support line is a better option than the later down the line debt telephone pursuit centre, they are right bar stools.