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502 – Standing up for the tax man

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27 September 2010

 

THE tax man is a universally reviled figure among, well let’s face it, many businesses – all that money earned, and HMRC wants always a seemingly bigger part of the pie.

But it’s not all bad news about the taxman, argues Tim Rosser, the boss of Turning Circle Solutions.

I subscribe to Tim’s occasional newsletters, and was particularly struck by this information – how the tax man has helped small businesses survive the recession through the time to pay scheme.

Yes, that’s right. At the same time that the Treasury has released an additional £900m to track and trace tax avoiders, there is also good news for those SMEs still struggling during such an adverse trading period.

Here’s an edited version of Tim’s newsletter with advice on how to arrange a time to pay scheme, something which Tim has organised for many of the company’s clients.

Tim writes: “Why are we standing up for the tax man? Well, many thousands of SMEs have been able to survive horrendous trading conditions thanks mainly to the HMRC ‘Time To Pay’ (TTP) scheme. Originally introduced in November 2008 to allow businesses time to pay PAYE, corporation tax and VAT, TTP created a climate of eye boggling leniency, as far as unpaid tax was concerned for UK businesses during the whole of 2009. Some companies were being given as much as three years to repay their tax liabilities. Simply unprecedented.

“It’s not surprising therefore that the level of unpaid taxes in UK shot up from £2 billion as at 30th June 2008 to £28 billion as at 30th June 2009. And I guess all this economic forecasting we’ve been hearing about assumes that every penny of this unpaid tax is going to be collected.

“This climate of tax repayment leniency simply could not continue in 2010 as the UK public sector deficit continued to mount and generous TTP schemes are now far harder to come by. This situation is hardly likely to improve as we move towards 2011 when we consider the level of public sector cuts now being actioned by the Coalition.

“Nonetheless, in our opinion, if approached in the right manner, HMRC still continues to be a significantly more visible, supportive and practical ally to the millions of small businesses experiencing cash flow difficulties than, say, the banking sector. And for that we need to thank the tax man. They are not to be pilloried all the time.

“If we were to distil a debt negotiation approach that finds favour with HMRC it would be this;

“Always be polite; do not treat HMRC as the villain of the piece, the tax officers are 1) only doing their job and 2) human after all and quite enjoy being treated as such.

“Respond to tax demands and correspondence on a same day basis. HMRC hates being ignored.

“Be prepared to talk with openness and honesty about why your business is experiencing cash flow difficulties. You have to present a convincing case, so speak from the heart. But do your research first! Do not expect HMRC to agree a repayment deal if they are the only creditor being deferred while all your other suppliers are being paid on time!

“Explain how the debt to HMRC will be repaid and also produce a cash flow forecast to support your proposal. The proposal should effectively be treated as if it were a mini business plan.

“Include the first tax payment instalment with your proposal as a means of good faith.

“Faithfully note down whom are you speaking to and the time and date of any conversation end ensure that any TTP agreement is evidenced in writing. HMRC is rather large and unwieldy organisation; it is often the case that you need to speak to a number of tax officials to get a TTP agreed. Make sure you keep a trail of what was said and by whom.

“And if you can’t stick to the terms of a TTP then don’t hide, communicate the problem with HMRC at the earliest opportunity. They may be prepared to alter the terms of the existing arrangement.”

If you would like to read the full text of Tim Rosser’s newsletter, you can read it here: Standing up for the Tax Man.

Business Car Manager: Editor’s Blog

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Ralph Morton

Ralph Morton

Ralph Morton is an award-winning journalist and the founder of Business Car Manager (now renamed Business Motoring). Ralph writes extensively about the car and van leasing industry as well as wider fleet and company car issues. A former editor of What Car?, Ralph is a vastly experienced writer and editor and has been writing about the automotive sector for over 35 years.

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