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Reviewed 8th December 2023
Here are a number of areas in which our experienced team can help Scottish residents with HMRC problems.
Sole traders and limited company directors may find themselves in serious amounts of personal debt if HMRC has implicated them in tax avoidance schemes. The Revenue has the jurisdiction to extract funds through DRD – Direct Recovery of Debts – even if you believe the tax scheme you utilised was above board. There are very few UK firms with the expertise to handle and address Accelerated Payment Notice enquiries – but at Scotland Debt Solutions we have amassed strong experience in a short space of time – you can read more here.
If you’re a director, personal liability becomes a serious issue when your company starts to struggle financially. In the event of insolvency, repayment of an overdrawn directors’ loan account, for example, will be pursued by the insolvency practitioner to provide higher returns for unsecured creditors.
You may need to draw on personal finances, or even the equity in your home if a significant amount is repayable. Should a personal guarantee have been provided for business borrowing, the potential for your own bankruptcy increases.
Whether you’re a sole trader or company director, there are some initial steps you can take to deal with the threat from HMRC, however.
Initially, you should ensure the information held by HMRC is accurate, and that the tax demand they’ve sent is valid. You may need to challenge their demand if you believe it’s incorrect, or you’ve made a mistake yourself and simply need time to correct it.
A Time to Pay arrangement may be an option if your tax affairs have previously been up-to-date, and you contact HMRC quickly. When considering an offer of payment, they take various aspects of your financial situation into account, including the problem that initially caused the financial difficulty, the value of your assets, and how long it will take to pay the debt.
It’s a good idea to seek professional help when calculating an affordable repayment figure – if you renege on a Time to Pay arrangement the entire amount is likely to become due immediately.
HMRC have a wide remit when it comes to enforcing debt. They take action swiftly and don’t always need a court order to do so, which is why it’s so important to let them know quickly about your inability to pay what you owe.
If you fail to pay your HMRC liabilities, you’ll receive a tax demand through the post. After this, they have a number of enforcement measures open to them, including:
The addition of interest and surcharges can make a relatively small debt unmanageable. You’ll incur a penalty if your tax return was submitted late, regardless of whether the amount due can be paid on time.
HMRC may pass your case to a local debt collection agency, which could mean phone calls, emails and visits to your home or business premises. It’s worth knowing they have no right of entry, however, and are not allowed to seize any of your goods.
You may be able to reach a repayment agreement with the debt collection agency, and it’s a good idea to send them a copy of your budget plan along with any offer you put forward.
This is an order of the court that allows HMRC to take further enforcement measures to recover their debt. It is issued by the Sheriff’s Court, and must be followed up by a ‘charge for payment’ which gives you 14 days in which to pay.
HMRC can also apply to the Sheriff’s Court for a decree. This makes the debt official, and again, will be followed by a 14-day charge for payment.
Failing to make payment following a summary warrant or decree allows HMRC to take diligence measures against you. These can include:
If you owe more than £3,000* and have failed to pay after a charge for payment has been issued, HMRC can enforce your sequestration (bankruptcy). (*This figure is temporarily set at £10,000 following the Scottish Coronavirus Act).
Accelerated Payment Notices (APNs) have been used by HMRC to deter the use of tax avoidance schemes, and essentially demand that overdue tax is paid within 90 days of receipt.
With no recourse for appeal, this has left people under the assumption that their tax affairs were in order, with the potential for further action being taken against them. The threat of insolvency has loomed for many, but with professional guidance it’s possible to deal with this difficult and worrying situation.
If you’re being pursued by several creditors and insolvency is a real possibility, you may be eligible to enter an insolvency process such as the Business Debt Arrangement Scheme (BDAS) or a Scottish Trust Deed.
For companies, a Creditors’ Voluntary Liquidation (CVL) could reduce the potential for personal liability. Alternatively, a Company Voluntary Arrangement (CVA) would halt any legal action being taken against you by creditors if your company is eligible, and allow repayment of the debt in affordable instalments.
Scotland Debt Solutions has five offices around the country. We can negotiate on your behalf with HMRC, and offer a free same-day consultation to discuss your needs.
Levels of unsecured debt in Scotland increased dramatically during 2022 as the cost of living crisis took its toll on household finances.
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Administration is an insolvency process that provides breathing space for companies struggling with debt, giving them the time needed to establish a plan going forwards. With several options potentially available at the end of administration, it’s an effective step for many businesses.Find out More
Whether you are a sole trader or a limited company director, we can help you work through your current financial problems including money owed to HMRCBusiness Debts
A Company Voluntary Arrangement (CVA) can help a company to escape debt by negotiating a formal payment plan with creditors allowing for reduced monthly repayments. Directors retain full control of their company during a CVA and the business is allowed to continue trading throughout.Find out More
When a limited company becomes insolvent, it’s important for directors to place the interests of creditors first and do all they can to minimise further losses. Creditors’ Voluntary Liquidation (CVL) is an insolvency process that allows this to happen, and ensures directors comply with strict insolvency laws.Find out More
Members’ Voluntary Liquidation (MVL) allows you to close your business and extract the profits in a tax-efficient way. It’s a process that’s available to solvent limited companies, and requires you to make an official Declaration of Solvency prior to commencement.Find out More
A director’s loan account (DLA) can become overdrawn if too much money is taken from the company that isn’t salary or a dividend. Directors’ Loan Accounts are useful when operated with caution, but can be a cause of concern if the company becomes insolvent.Find out More
A Winding-up Petition is a legal notice presented to the court by a creditor with a view to forcing a company into liquidation. If a winding-up order is granted by the court, compulsory liquidation can take place very quickly, and this signals the end of the company.Find out More
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