If you have outstanding HMRC debts, whether it is Income Tax Obligation (PAYE), NI or VAT debts, you must deal with them as soon as possible. These are classed as concerning financial obligations (Priority debt). The repercussions of not paying them can be extremely serious and can lead to recovery action or enforcement action by numerous courts including county courts and high courts.
In this blog, we are going to explain to you what can happen if you have HMRC PAYE Tax Arrears and what can be the repercussions if you let it accumulate over time.
In recent years, the introduction of Real-Time Details (RTI) for submitting month-to-month online payroll returns have powered HMRC in gathering details about every time you pay your staff. HMRC can now acknowledge when tax repayments have not been made as well as the non-payment is flagged at HMRC’s Financial debt Monitoring as well as Financial (DMB) division.
If you are a company director and shareholder who is dealing with monetary stress and are having difficulty paying HMRC, you might have built up defaults of tax in relation to Pay as You Earn (PAYE) and National Insurance Contributions (NIC).
HMRC have a stringent procedure and various powers in handling late repayment as well as are able to rapidly determine late payers.
If you cannot pay your PAYE Tax, VAT, Corporation Tax and Self-assessment taxes, then HMRC will be swiftly on your business to accumulate the quantity owing.
What is PAYE repayment tax obligation?
Your PAYE tax costs will consist of-.
- Employee income tax deductions
- Class 1 and 1B National Insurance
- Student Loan repayments
- CIS Deductions
What to do if you have PAYE Defaults with HMRC?
HMRC expects tax payment to be made in a timely manner with regular monthly PAYE repayments for all services being set for the 22nd of the month (or the 19th day of each calendar month if paying by cheque with the post).
If you cannot pay your PAYE responsibility as well as tax obligation, HMRC will take enforcement action to recover the money.
As a result, if you don’t really feel that you are most likely to handle your PAYE debt, it is very important that you call HMRC ASAP.
Whilst it might not stop penalties accumulating on late payments, you might have the ability to agree on a Time to Pay Arrangement with them.
Penalties on HMRC PAYE Tax Arrears obligation hold-up
HM Revenue & Customs will bill late repayment fines on PAYE quantities that are not paid in full or not paid on schedule.
Number of defaults in the tax year
Penalty percentage applied to the amount that is late in the relevant month
1 to 3
4 to 6
7 to 9
10 or more
Daily charges and penalty/interest will certainly continue to accrue on all unsettled quantities from the due and payable day to the date of payment.
A late repayment penalty is charged if you pay less than what is in fact, due as well as if this quantity is still outstanding after 6 months after that an extra fine of 5% is charged on the quantities unpaid.
Failure to report Real Time Information (RTI)
The RTI online software program offers employers with a Full payment system (FPS) which tells HMRC regarding overpayments to employees as well as what deductions you have made.
You will obtain a penalty if your FPS is late or you do not send out the info online. The penalties are determined as adheres to-.
Number of employees
1 to 9
10 to 49
50 to 249
250 or more
If you are more than 3 months late, you can be charged an added 5% of the NIC that should have been reported.
If you do not send the FPS, after that HMRC will certainly increase an estimate of just how much HMRC believes you need to pay based on previous submissions and repayments as well as penalties will certainly also be included in the amount owed.
What will HMRC do if I accumulate PAYE Tax Arrears?
HMRC will certainly take a number of actions in order to enforce repayment of tax liability.
The most vital lesson to comprehend is that you must refrain from doing absolutely nothing, as this will only make matters worse. There are a few of the collection procedures, which HMRC will certainly use as part of their enforcement process:-.
- Payment Demand Reminder.
- Enforcement Action– 3rd party collection and HMRC Debt Management.
- Individual Insolvency or Company Winding Up application under The Insolvency Act 1986.
- Personal Visit by HMRC Debt Collector to collect the due balance
- HMRC may make the company director personally liable for the tax payment
This was a brief summary from our side to help you understand the PAYE Tax Arrears and what would happen if you accumulate them over time. We covered what actions HMRC can take with you or on your account and how you would be affected if you didn’t take it seriously. We hope that this blog has helped in some sense to understand the basics of your PAYE Tax Debts.
You can contact us on 0203 318 0990/ 0208 568 9687 for a free and no-obligation personal appointment to discuss your full case of director loans with Personal guarantees and if your business is unable to pay off business debt liability.