In any growing or turnaround business where cash is critical, the obligation to HMRC will always play a significant part in forecasting and business structuring. Over the last 12 months it appears to us that HMRC are taking a less relaxed approach to collecting PAYE and other tax liabilities. In our experience, with the right engagement early, HMRC can be thoughtful and understanding if there are good reasons why debt has built up – evidenced by agreeing Time-To-Pay arrangements.
But recently we have seen an increase in two types of occurrence that can have significant consequences for managing cash flow.
- Issuing of bonds – previously these have typically been issued by HMRC when there is a history of liquidations or repeated inabilities to settle arrears in a business – with a requirement to make an advance payment for 4 to 6 months of a PAYE or VAT liability that will be held as a bond for up to 12 months. We are now seeing instances when bonds are being demanded for businesses without such a chequered history – it seems the relationship with HMRC is the key driver. Late payments, poor communications, arrears build up or sometimes just a business in a sector deemed risky may be reason enough.
- APNs. These have been around for a while but HMRC are building up a tidy collection of Accelerated Payment Notices in respect of tax avoidance schemes. Various figures have been quoted and HMRC have collected upwards of £3bn since they started to harden their approach in 2014. APNs cannot be appealed – but they are also viewed as a pretty blunt tool and have attracted some criticism.
So, with Bonds and APNs, do we think HMRC are playing hardball? As far as APNs are concerned they have given good warning about tax avoidance schemes and on the whole such schemes are best well avoided – unless your liquidity is sufficient to take the hit if the scheme falls foul of the regulations. That’s quite a risk.
On HMRC payment bonds, we are working increasingly with our clients on their engagement with HMRC – we have a specialist service centre to do so. The requirements to provide a bond might just be a sign of HMRC feeling the pinch themselves.
When dealing with HMRC, we advise strongly on a few key points:
- Don’t ignore them.
- Tax arrears are real – and could be the trigger that can push a business over the edge.
- HMRC do have a negotiating face. It is a grown up one and to be treated with respect but their interest is in collecting owed tax, not putting businesses under.
- Time-To-Pay arrangements can create real headroom for businesses to manoeuvre.
- There may be an alternative approach to restructure your debt to clear HMRC arrears and reduce the pressure on the business.
- ReSolve Capital has a specialist HMRC bond lending service for its Advisory clients
With a hung Parliament, or at best a coalition, creating instability in the UK economy we could see increasing pressures on cash flow. We’ll continue to monitor through our Advisory and Capital divisions.
As this seems to be a changing landscape – keep up to speed with our latest relevant experiences of the changing faces of HMRC towards SME’s through ReSolve Periscope and on our twitter and LinkedIn channels.
If you have any specific needs to do with managing your relationship with HMRC, we have a service centre set up to help you – the details are in this paper: ReSolve specialist services – HMRC Engagement
There are also options to use our ReSolve Capital division if you are faced with an HMRC bond – just contact firstname.lastname@example.org in confidence.