The introduction of HMRC’s Time to Pay arrangement indicates an understanding of the problems facing limited companies in this challenging economy, and a willingness to assist businesses facing genuine cash flow problems.

This formal agreement with HMRC allows you extra time to pay your tax bill, with certain caveats:

You must be completely honest with HMRC about your company’s financial position. If they suspect that you are insolvent, or they agree to an instalment plan only to discover later that you misled them during negotiations, any arrangement will be cancelled and the business could be liquidated.

They prefer to be contacted prior to a tax payment falling due, rather than deal with arrears. Although arrears can be included within a Time to Pay arrangement, contacting them as soon as you foresee a problem demonstrates a degree of financial control and transparency of operations.

Time to Pay arrangements are only offered to companies temporarily unable to pay their tax liabilities. If an instalment plan is agreed, and you spend money on something other than your tax bill, you will be penalised if this comes to light.

An extended payment period of up to a year is common with a Time to Pay arrangement, and although the overall debt is not reduced, this added time relieves some of the pressures on a company that is already struggling.

It should be noted that a failed Time to Pay arrangement can be disastrous for a debtor, often leading to HMRC attempting to close the limited company in order to recoup its debt. This is why you need to ensure that no payments are missed or late for the entire term of the arrangement.

Invoice factoring and invoice discounting provide access to the value of invoices yet to be paid. If your credit control processes are efficient and debtors have a good history of paying on time, both methods can quickly release working capital.

Invoice factoring enables your line of credit to increase in direct correlation to sales, with new invoices offering access to more cash.

Generally speaking, 80%–90% of the value of unpaid invoices can be accessed. Invoice factoring or invoice discounting may help to provide the injection of cash needed to pay HMRC, and relieve financial pressure in the long term

Companies owning assets of considerable value may be able to obtain a short-term loan secured on one or more of them. Assets could include company vehicles, equipment, property or inventory.

It is a good way to release cash in an emergency, satisfying HMRC’s tax requirements and giving you breathing space to bring your company’s finances under control again.

This is a good option if you have several unsecured creditors pressuring you alongside HMRC. It is a formal agreement to pay part or all of the debt (for example: 30p to the pound) over a longer period of time, and can include tax arrears.

Several payments are condensed into a single monthly repayment, which has the effect of freeing up cash immediately. It can be the catalyst for positive change in companies struggling under the pressure of debt.

You would need to appoint an Insolvency Practitioner to analyse your company finances and present the case for a CVA. Robert Leonard has a long history of successful negotiations, and offers a free, same day meeting for companies in distress.

If none of the above options are possible, the best course of action may be to enter Company Administration with a view to turning the business around. If HMRC are about to issue a petition to wind up your business, or you simply see no way out of your current situation and are worried about personal liability, this route into formal insolvency could potentially avert the threat of legal action from HMRC.

Robert Leonard can help you negotiate to bring about positive change in your business. Contact us using out contact form for a free initial consultation.