Owing the VATman!

[silvermouse]

Hello,
Long story short - I haven't paid my VAT for a long time and they are now doing an inspection on me. I knew it would eventually arrive but my personal life kind of took over for a while, and now I'm paying the price.

I predict to owe somewhere between £10k and £20k, and am in a position to be able to pay it back at at least the rate of £1k/month; do you think this will sound reasonable to them, or will they seek to receive their money much sooner?

Any and all advice will be greatly appreciated.

Regards

 

[steve23]

Hi,

As far as them trying to recover the money, it would depend on how they could do it - i.e if you have a brand new Bentley in the drive way you might find them taking action against you.

Failing that - its just like any other debt in that you should be able to negotiate a repayment schedule.

I would have thought £1000 a month quite reasonable - make sure you can afford that, so you dont end up getting in further trouble later on.

Do make sure you are 100% straight with the tax office - they have far more powers in this sort of situation than other creditors and if you mess them around you could regret it !

Main thing though - talk to them. Your not the first person to fall behind with a VAT payment and I doubt if you will be the last.

Provided you play straight, you should find everything works out ok.

I dont think they can shoot you - although the way the law is going in this country they might be able to get you under the terrorism act or something !!!!

All the best

Steve

 

[dp0848]

Are you a sole trader or operating via a limited company?

 

[Zeno]

You have not provided enough information for us really to say. The one thing you may not have thought of is the interest and penalties that may be applied. Seeing as this is being found out by investigation rather than volunteered by yourself I am afraid they may be harder on you.

Of course, right now HMRC are under instructions to play nice however that remains to be seen if they will do it.

If I were you I would start working on a more concrete figure of your liability. This will enable you to budget repayment terms more realistically.

 

[KM-Tiger]

You don't say whether you have made VAT returns or not. If you have not, then the first thing is to get those done properly. Your accurate return will almost certainly be less than their assessment.

My experience of having to defer VAT payment (not my fault in case anyone wondering!) is that they will want you to settle in 6 months. Apparently terms longer than this have to be agreed at a higher level and they prefer not to escalate if it can be avoided.

As others have said talk to them, you *can* negotiate, but they will not be a pushover, and most importantly always do what you say you will do on time. If you don't they have a habit of immediately instituting full recovery proceedings, irrespective of what has been agreed.

Bear in mind that another VAT return/payment will be due in 3 (?) months time. Use that to your advantage, as not falling behind with that is a powerful argument for lengthening the term.

 

[silvermouse]

Firstly, many thanks to all those who have already replied - I may sleep tonight after all!

I am a sole trader, and work in a field of the construction industry. Luckily as yet I am unaffected (touch wood) by the credit problems this country faces on a wider scale, and hopefully I should remain that way.

I am happy to be open and honest, and hopefully that will gain me some ground with the inspector who visits - I already have prepared a breakdown of my income and expenditure that clearly shows I am happy to aportion every spare penny to repaying this debt. My main worry is how long they will give me to repay the amount - 6 months would certainly be impossible, and I am not in a position to gain funds from elsewhere.

I have no real equity in the house (currently undergoing renovation so my deposit is meaningless), nor own anything of any real value. The biggest fear was when I read they have the power to put me in jail!

I haven't made the returns to which the money is owed, so should I make doing that a priority before the inspector arrives? Will one 'catch-all' return for the year suffice?

I'm currently almost back upto date with my accounting, and cannot forsee any future problems with doing the return and paying the bill.

 

[Zeno]

How long a period are we talking about? - As the non submission is likely the reason for your visit then submitting the returns now probably won't make much of a difference.

Broadly, what did you do with the money you should have paid to HMRC? I am assuming that it is not kicking about your current account and this may have implications.

 

[silvermouse]

I think I've missed four returns in total. The money has gone on daily living expenses, and has been spent because I've been working less due to the problems in my personal life. I know I will be due a tax rebate this April, which should cover at least half of the amount outstanding - will they take that into consideration?

It may even be a possibility to pay more per month, but as someone has said it is not wise to offer a payment arrangement which is not realistic.

 

[David Griffiths]

Are you really saying that you haven't paid any VAT for a year? Not even on the assessments that were raised? It's difficult to imagine that they would have let that happen without taking some recovery action months ago.

Or have you simply paid what they assessed, because it was less than the returns would have shown?

 

[fergywales]

silvermouse, if you have indeed not made payments for 4 consecutive quarterly returns, pat yourself on the back for surviving so long, but now expect to pay the price.

Even worse is the fact that you claim to have used the money for "daily living expenses" as you were working less. If you tell the inspector this, expect some very harsh reality to come your way.

As for the personal tax rebate, this expectation is based upon what? And why would this not solicit investigation of your personal takings from the company? Tread very carefully.

 

[silvermouse]

I know I'm due a rebate because a lot of tax has been stopped at source (CIS), and obviously I'm aware roughly how much I'm likely to earn in this tax year.

I don't see what else I can tell them other than the truth, surely that has to go some way to appeasing them?

If I had an idea of how long they're willing to give me to make the payment I'd feel an awful lot better -it's if they demand immediate payment that I'll be worried.

 

[Zeno]

HMRC have (or will have soon if not already) the ability to set of liabilities of one tax against another. It is possible that they may agree to do this with your income tax rebate although I will be honest and admit that this is something I heard about on a course and have not as yet seen in practice.

I think the point that was trying to be made is that HMRC are harder on cases where the VAT cash has been taken by the owners/directors for their own ends. They tend to be slightly more sympathetic where the cash has been swallowed by bank overdrafts and trade debt etc.

How sure are you about this £10/20k? Can you outline a bit more about your business?

 

[silvermouse]

Well the money has not been spent 'willy nilly' if you will; I've had personal circumstances which have forced me to work less, which of course had an impact on my finances and also my ability to actually do all of the paperwork the business seems to generate. I have noticed a slight down turn in the market, so I could say that the credit problems have affected me slightly without lying. Obviously, these are reasons, but of course I understand that in the grand scheme of things they mean nothing to HMRC and I am solely liable for paying the money back.

Is being willing to pay enough to keep them happy?

Well the rough figure I have is £12k - but of course they may find other slight mistakes from past returns if they do look at them, then of course there's the interest and penalties.

I've already cashed in one ISA, and am making steps to reduce outgoings so that I can repay the amount quicker. I want to pay it off as quick as I can as I don't like owing money to anyone, will any of this help my cause do you think?

I have read about their ability to offset tax liabilities, but I'm not sure how to approach them about it. Should I just say "I'm due a rebate in April, can that please go against my VAT bill?", or do i need to ignore the fact that I know that money is coming?

 

[Rocco]

My father in Law, has a similar problem, even worse I would say, he had a construction company in 2003, his accountant was his best friend, made a mess of my Father in Law's VAT return, cashed few checques and took the money himself,long story short, the VAT came after my father in demanding 28000, took him to court, and now came with a 50000 figure, including interest an all thehassle! the accountant is under investigation but the VAT is not bothered they want their money. My father is law is getting secuested in 14 days, can they make him sell the house even though half of it belongs to his wife? can anybody help please, is there anything he can do?? he worked all his life and paid all his taxes, never on the doll, the VAT doesn't seem to care about his accountant robing him!