HMRC determined to drive my into the gutter !

[aliensliveathmrc]

Hello, my first post so appologies if it's wrongly located and a wall of text !
I'd like to ask some advice so i'll furnish you with some facts.
My wife & I started a business in March 2010 when vat was 15%. We (foolishly) did not know about the impending recession and were planning on leasing an existing business and improving on it to make a profit. The lease amount was 95% of the previous three years 'shown' profit, yearly.

I carefully constructed a business plan and knew things were tight but we were confident we could improve over the outgoing owners business.
To start with things were good, we vat registered in month four (August) then watched in horror as the vat went to 17.5% and then 20% within six months taking £6000 off my target gross profit per year !

As the recession hit harder we watched every little bit of profit evaporate and for the next five years my wife and i worked 7 days a week and never took more than £4k drawings each per year. No, i'm really not sure how we survived !

Our net vat returns fluctuated between £22k - £24k per annum and although we fell behind on occassion, we mostly caught up over time.

As soon as we were able to escape the lease we piled absolutely everything into paying off our suppliers, staff, local rates, payee, etc. The only thing we could not clear was the last quarter vat which was just shy of £6k but were able to de-register and cease trading in Oct 2014 none-the-less.

Having paid nearly £100k over five years, we wrote to hmrc asking them to write off this small amount and received a reply that basically said they needed to speak to us on the 'phone. I declined as i have had problems with them 'changing' agreements before and wanted everything in writing.

Our health has suffered tremendously, my wife is in remission from cancer and i have other issues. My wife is doing bits of part-time and i'm trying to get a 'hobby' business going (we're 56 years old btw).

So now we receive a letter from a debt collector, having had no income for the last (now) 7 years and with no discernable income atm, how can i get them to write off this debt ? We are totally solvent (really i have no idea how !) in all other respects so it's not really a bankrupcy situation.
We are only asking them to write off 6% of what was due yet they are determined to milk this cow until it's dry

Any suggestions ?

 

[Alan]

I'm assuming you are / were not / a limited company - as of course that makes a substantial difference.

 

[aliensliveathmrc]

Sorry forgot to mention that, no we were Partners as in Sole traders.

 

[Mark T Jones]

Not what you want to hear, but HMRC are a legitimate creditor doing what any wise creditor would do - recovering what they are owed

They might offer time to pay but in view of time elapsed it is a long shot. They certainly won't go for a discount or write off.

As you are solvent, presumable there are some means to pay? Why not approach them with a realistic schedule? At least it will buy time

 

[AllUpHere]

The thing with VAT is that it was never your money. You simply collect it and pass it on (or not in your case). I can't see why they would write it off.

 

[PipeTen-Carl]

I agree much with the comments above however for the sake of your health, find yourself a FA/accountant willing to deal with HMRC on your behalf and come to a settlement / repayment plan ASAP. Yes it's going to be more £ you need to find in the short term but overall will end up much cheaper to just get it sorted.

 

[JEREMY HAWKE]

You dont need an accountant to do this its just more money .There is no dispute over the amount there are no culculations to be done . If you work out what you can afford to pay no matter how small and start making those payments they will back off and allow time . If you phone up they wont refuse a payment by card for these amounts
They are not trying to drive you in the gutter they have a job to collect revenue and if you offer a plan then you are doing something to pay it

 

[Ian J]

Having paid nearly £100k over five years, we wrote to hmrc asking them to write off this small amount and received a reply that basically said they needed to speak to us on the 'phone. I declined as i have had problems with them 'changing' agreements before and wanted everything in writing.

We are only asking them to write off 6% of what was due yet they are determined to milk this cow until it's dry

Any suggestions ?

I agree with what the others have said that you need to talk to them but , and it's a big but, you need to change your attitude before you do so.

Vat is a tax that is payable by your customers and not you so comments like "HMRC determined to drive me into the gutter" and "they are determined to milk this cow until it's dry" are not only extremely unhelpful but also inaccurate as an alternative way of looking at the situation is that your customers have paid the Vat to you and instead of passing it on you have stolen it. Harsh? well so were your comments about HMRC who are merely doing their statutory duty so instead of complaining about how harshly you have been treated just have a think about what a financial mess this country would be in if every Vat registered business decided to knock off a 6% discount.

You may well have buried your head in the sand for too long by now but grow a pair and pick up the phone and try and discuss a repayment plan sensibly with them.

 

[John Crowder]

Horrible situation but unfortunately in my experience HMRC do not just write off this type of debt.

As you have found they are more likely to pass it on to debt collectors.

You mention you are solvent so is a loan an option - at least that gives you back control of the situation.

 

[MyAccountantOnline]

I dont think HMRC will write the debt off and suspect they will continue to pursue it aggressively.

What I do suggest is that you speak with them.

I truly do understand your reluctance I have experienced them confirming something verbally which is later denied, but you will find the the attitude of those that work in debt management varies a lot.

Try to speak to someone who sounds like they have some empathy even if it means you tell the person you get through to you need to call back.

Make notes of the exact call time and person you speak to, specifically ask if the call is being recorded and ask them to confirm what they've agreed in writing.

You need to do something as the debt wont go away.

 

[paulears]

I really do NOT get businesses that gamble with money that isn't theirs?

Surely every time you receive a payment you don't treat it as entirely 'yours'? That's madness. You do the return each quarter and you KNOW you have to keep sending them the money you collected for them. To me, this is like a solicitor using their clients bank account funds to prop up their business - it's wrong.

Sure, you have problems at home and I feel for you, but YOU spent it! You knew it wasn't yours, but failed to be prudent, and you gambled that business would be better later to allow you to pay the money that wasn't even yours to spend.

I read this so often, and I know how hard it is, as I have only a few hundred pounds more than my VAT payment sitting in the account now, waiting for them to take the money. I see the balance and know that it is not available funds.

With your turnover I'm amazed you don't have an accountant. Mine saves me far more than he costs, and what I pay him I consider good value, despite being quite a bit of money.

Ostrich syndrome rarely works.

 

[aliensliveathmrc]

Thanks all for your comments, i suppose my question was a last ditch attempt to see if there was any way around it.
Just a couple of mentions:
Yes of course we had an accountant when the business was running however i did only use them for end-of-year work, the rest was done by myself.
We understood that the revenue was paid by the customers to be passed on but as allmost all our suppliers were small local business's (or staff) that was the only way to pay them and figured it was more important that they were paid - guess we were wrong

Our attitude is a result of dealing with them over the years, they are dishonourable bullies. I have appologies in writing from them for things they have done. I have always contacted them ahead of problems and tried to 'play fair' but they have no interest in small business' other than they are easy targets. If there was a human to talk to you could work out a plan but all i get is belligerence.

"I really do NOT get businesses that gamble with money that isn't theirs?"
If we had separated out the vat (which netted 12%) we would have gone under as the staff would not have been paid and possibly the suppliers too.

We knew the business was not viable by the end of year two but were fixed in to a lease, under the circumstances we're very proud to have achieved the end result but now wondering how we can possibly find £6k with almost zero income and both too unwell to work.

 

[paulears]

If you knew you were insolvent, and continued to trade, that's rather a different matter?

 

[japancool]

To start with things were good, we vat registered in month four (August) then watched in horror as the vat went to 17.5% and then 20% within six months taking £6000 off my target gross profit per year !

VAT was 17.5% in 2010 - it rose as of 1st of January of that year.

Perhaps you could write to a media outlet such as the money columns of various newspapers and explain your situation. They might be able to negotiate with HMRC and basically shame them into helping you.

But you say you are solvent in all other respects. Do you own your own home?

 

[Pish_Pash]

I know this will sound harsh, but it reads like you think you're a victim of HMRC?

As someone else has pointed out, you spent £6k that was never yours...you were meant to ringfence it & hand it over to HMRC....you didn't & now they want it - I see little wriggle room.

 

[JamesMason67]

You need to talk to them mate, they will bankrupt you ultimately and its too late to try transfer any assets.

To be fair as the VAT rate was rising, you were collecting more VAT from your customers?

I have found them (HMRC) to be OK to deal with. I appreciate its a nerve racking thing to do to phone them, but on the day it will be one person talking to another. And these things tend not to be as bad as you imagine them to be. Take a few big breaths, pick up the phone and talk to them. My guess is you will come off the phone a much relieved guy. They're not out to get you and will listen to your proposal.

You owe them that £6k fair and square whatever spin you want to put on it and they have infinite powers to retrieve it. If someone legitimitely owed you £6k and you had infinite powers you'd use them too. You cant blame them for this.

We've all used VAT money to help VERY short term cashflow issues but you let it go too far. Hopefully you will have learned something here. You used the VAT income as it was "just sitting there" I'm guessing.

As I say, we've all done it, but had you paid it, you'd have found the money elsewhere to meet payroll etc. You simply had no motivation to find it elsewhere and took the "easy" route to your cashflow issues. Easy done.

Its not the end of the world, you'll get past this if you pick up the phone.
You're in for a rough, rough ride if you don't.

Stop acting like the victim here, be brave one day and call them and take a whole lot of stress off you and your family.

Let us know how you get on..
James

 

[aliensliveathmrc]

Things are never as black & white as they seem but i thank you all for taking the time to reply.
I had exhausted all other possibilities, there was nowhere else to go. the bank would not help and no family help available. Loan sharks were a big no, no for me and i was tied into a lease.

To 'japancool': All calculations, discussions and agreements were done and signed in late 2009 when vat was still at 15%

As it's now been passed on to debt collectors i'm guessing i shall be dealing with them which may or may not be a blessing - we'll see.

 

[Root 66 Woodshop]

With all due respect, you're talking about what... £6,000?

I had a debt at the age of 21 of £75k all because I was duped by my ex-wife...

All I did was talk to the mortgage company and other debtors - informed them of what had happened, how it had happened and that I refused to pay the entirety of the debt - told them I'd rather top me sen than pay them something that I had no control over at the time... they gave me straight forward answers, told me I had to pay the debt or they'd be forced to make me bankrupt ... which they even said they didn't want to do... I laughed at them, I'd already lost the house, lost the wife and kid... did they honestly think that making me bankrupt would help or even solve the issue?

In the end - I had the best part of 30% of the debt wiped, then the balance was split between myself and the ex wife... which was nice!

I paid it off against a credit card then cancelled the credit card and paid them back at £100 per month. finished something like two years ago... credit ratings back to normal ish - on my third wife had a business in between - still working my nuts off to make ends meet but life is just that... life.

I guess what I'm saying is deal with the issue you have, no point in trying to get around it... speak to the people that contact you and you might be lucky and get someone with a brain as well as beating heart that understands that... "sh** happens!".

 

[Chris Ashdown]

Absolutely no point talking to a dept company, they have no interest except getting the full money plus their own charges on top

Talk to HMRC about the issue

 

[AllUpHere]

Absolutely no point talking to a dept company, they have no interest except getting the full money plus their own charges on top

Talk to HMRC about the issue

You watch too much telly. They will more than likely be happy to go through an income and expenditure form with the OP, and work out a payment plan based on his ability to pay.

 

[Chris Ashdown]

Yes you are right but they also add on their horrendous charges on to , where as if you sort it with HMRC there are no interest or other charges once its sorted

 

[Root 66 Woodshop]

But Chris,

He's already been passed to the debt company... you can only go forward with these chaps (including HMRC) there's no going backwards with them...



Debt companies usually don't take a payment until they've received payment either... i.e. they'll take a percentage of the debt once collected.

I think you're thinking of Bailiffs Chris.

 

[japancool]

Things are never as black & white as they seem but i thank you all for taking the time to reply.
I had exhausted all other possibilities, there was nowhere else to go. the bank would not help and no family help available. Loan sharks were a big no, no for me and i was tied into a lease.

To 'japancool': All calculations, discussions and agreements were done and signed in late 2009 when vat was still at 15%

As it's now been passed on to debt collectors i'm guessing i shall be dealing with them which may or may not be a blessing - we'll see.

But you knew VAT was going to rise back to 17.5%. It was announced in 2007 that the VAT rate cut was temporary.

In any case, you're refusing to do the one thing that might actually help you, which is talk to either HMRC or the debt collectors. Not sure how much help anyone can give you here.

 

[Toby Willows]

Most debt collection agencies actually buy the debt for a very small percentage of it's value and are more than happy to take a greatly reduced "full and final" settlement, or take small affordable payments over many years. They can no longer add interest or charges to these debts.

Don't know if this is something HMRC do though, but I can see how on such a small amount (to them) it might be more economical to do so. OP, who are the debt collectors?

 

[Mitch3473]

Absolutely no point talking to a dept company, they have no interest except getting the full money plus their own charges on top

Talk to HMRC about the issue

Not necessarily so. Most will listen and negotiate.

 

[ssauk]

After 10 years of threats from HMRC and their collection agents for a business that had ceased trading and which I had never VAT registered, I eventually got help from my local MP.
HMRC issued court proceedings against me and a judge found in their favour to the tune of 8k. At one point the debt had reached 33k.
My advice is take all of your correspondence and contact your MP for assistsance with this.
I will be forever thankful to my MP for his help with this matter.

 

[JEREMY HAWKE]

Dishonorable bullies . I was with you until that bit
Nobody wants to pay due tax
You have to be straight to work for them you have to go through all the checks you have to be a sound upright person .
If you work for the tax office and you see people in better houses than you with better cars making better money and getting away with paying less tax than you , you would be putting the hammer down on recovering debt
We dont like it but we do need these people or we would tarmacing the pavements ourselves and chasing criminals with baseball bats because there would be no police

 

[Talay]

.......
To be fair as the VAT rate was rising, you were collecting more VAT from your customers?....

I think this might be the crux of the problem. I suspect that the OP never raised prices and thus (in a roundabout way) never did collect this from customers.

 

[alasdair1982]

Why don't you use the money your using to start your "hobby business" to pay the vat!!! surely that would make more sense than trying to start another business.

HMRC are reasonable people and will not refuse a reasonable payment schedule.Think of the costs involved in debt collection etc, They would far rather accept £500 a month or something to get it paid.

But please stop trying to wiggle out or finding a loophole to bury the fact you have been irresponsible with £6k vat.

 

[Gecko001]

Talk to HMRC. They will treat everything in confidence. Yes you will get sympathy from many quarters when the bailiffs come for the car and TV etc. but it might be short-lived and not really change the fact that you will have to pay the debt.

PS. If you want to talk to someone before talking the HMRC, I would go to your MP as has been suggested.

 

[Vectis]

I don't get this...you say you're solvent, you're starting another business, your wife has an income, yet you wont ring up HMRC and sort out the £6k you owe them from your last business?

This isn't going to go away. Pick up the phone and talk to them. Going to your MP or newspapers etc isn't going to help - the basic fact is that you spent the VAT money, which you'd collected, on other things. You owe that money. Ring them up and sort out a repayment plan if you can.

 

[JEREMY HAWKE]

I don't get this...you say you're solvent, you're starting another business, your wife has an income, yet you wont ring up HMRC and sort out the £6k you owe them from your last business?

This isn't going to go away. Pick up the phone and talk to them. Going to your MP or newspapers etc isn't going to help - the basic fact is that you spent the VAT money, which you'd collected, on other things. You owe that money. Ring them up and sort out a repayment plan if you can.

I agree all the B S and hot air on this thread is clouding the simple facts

 

[paulears]

What could you say to your MP? Can you help me get the HMRC off my back because they want me to pay them the VAT I collected from my customers, and I can't do it because I spent it.

Do MPs get involved with bad debts?

 

[JEREMY HAWKE]

What could you say to your MP? Can you help me get the HMRC off my back because they want me to pay them the VAT I collected from my customers, and I can't do it because I spent it.

Do MPs get involved with bad debts?

Their situation is very similar except they legally spend everybody elses money