Self assessment tax debt - HMRC won't negotiate payment plan?

[eversoslightly]

Hi, I am new here so apologies if this is the wrong place to put this.

I'm self employed and long story short I buried my head in the sand and let my self assessment tax get behind. I paid my first bill, then missed the last two and now have a debt of over 6k! I just rang them up in order to make a payment plan and ended up in tears!! I can't explain just how horrible they were. Made me feel like I should sell myself in order to pay them right this minute! We went through my in and outgoings and they could clearly see there's no way I can commit to paying £671 each and every month as they suggested. There IS the possibility I can pay a lump sum now and then to cover the shortfall, but really I just cannot afford more than £300 per month, and even that means I would literally have nothing at all left over and would need to go without petrol (I don't drive much as I work from home). I told them I WANT to pay, and I WILL pay, but their demands are unreasonable.

I was so shaken up by it all that I rang Business Debtline and oh my days what a mistake! They basically scared the living daylights out of me explaining how HMRC will send bailiffs round and make me bankrupt! They seemed to miss the point that I was looking for help on how I COULD pay, not how I could avoid it.

Please can anyone help me with what to say and who to speak to about this? I just need to set up some kind of affordable payment plan. And I REALLY need to avoid any kind of bad mark on my credit files. Frankly I'm scared to death to try with HMRC again direct and will just write to them in future.

If you can afford to pay £200 - £300/month, you could potentially get a personal loan for £6000 over 24 or 36 months and pay HMRC in full.

Ahh if only. Unfortunately I cannot get loans/ cards. Besides which I'm not sure the best idea is to pay off debt with more debt.

Please remember that if you are struggling to pay your tax arrears now you are probably not setting aside money to pay your tax bill for the current tax year when it falls due.

Personally, I think you need to be looking at extending your mortgage or getting a personal loan with monthly payments set at such a level that you can still put aside money each month to meet your tax liabilities as they fall due.

I would also suggest that you do the maths to work out of you wouldn't be better off taking employment as it appears that the self-employment net income (after allowing for tax due to HMRC) is not enough to balance the family finances. (Unless you have spent the tax money on non-essentials over the past 18 months).

is it worth going to MSE for advice - their forums are invaluable.

HMRC will chase hard for the money you owe. I think you have to be creative and come up with a solution to pay the debt.
Can you sell the car? If you work from home can you manage without the car? If they send bailiffs to collect the debt then the car will be first thing to be seized so it's better to sell it yourself, get a good price and use the proceeds to pay off some of the debt.
Can you earn more money? Could you take on some cleaning or ironing (obv you will have to pay tax from the earnings).
Have you anything that you can sell to raise a lump sum and then set up a payment plan for the rest?

Don't forget that you need to put this years tax away to avoid the same situation next year.

Unfortunately HMRC is the one debt you just pay

It's the reason why so many businesses (small & large ) go bankrupt at the end of January.

Agree with the others I'm afraid. This isn't one where you can find a magic solution. Can you borrow the money from family if you have no ability to borrow by way of loan or remortgage?

You say you can't get a loan but then you talk about wanting to protect your credit rating. If you have a decent credit rating why can't you get a loan?

"Besides which I'm not sure the best idea is to pay off debt with more debt."

As the PP said... HMRC is the one debt you pay. Don't pay the gas bill and you might get the gas cut off. Fail to pay your tax bill and you can find yourself in prison. If you have very poor credit and no hope of paying back your debts to HMRC or others then I'd strongly recommend you book an appointment with CAB or one of the other free debt advisory services.

How can you only afford £300 a month? If your business is failing that badly maybe its time to call it quits.

the other thing to bear in mind is that because of your failure to pay they'll also want a significant payment on account from you for this years tax even though it isn't due yet.

you owe 6k, WHICH IS DUE NOW they have allowed you to pay it off over 10 months (?) which is basically quite generous - and you are moaning!!!

All of us with businesses have to do this, it's part of the 'deal'. You work, get a big pay packet and have to put some aside to pay tax.

Assuming this is just for last year?

You need to look at your business quick smart, I am assuming 3 tax payments were due last year of £3k each? if so you should be setting aside £800 per month for tax.... if you can't afford this then your business isn't making the money you think it is.

I would suggest speaking to Business Debtline again. They aren't trying to scare you just telling you what happens when you owe money to HMRC and can't make the payments that they want. The danger is that you agree to a monthly payment with them that you can't keep up and then get into more problems. Business Debtline will show you how to go through all your income and outgoings to see what you can afford.

...this is why most businesses go bankrupt early on in their life, payments come in, you spend them like income then get hit with the tax .

I put a huge amount of income aside for tax bills, then occasionally I can take some back as I over provision. Which is nice.

www.hmrc.gov.uk/payinghmrc/problems/cantpay.htm just found this - might explain things in a less scary way :)

OP
First rule of thumb with HMRC
pay them something every week
so that the balance changes downward constantly so that if they do start legal you will always owe less than the last letter.

Talk to your accountant about what has gone so wrong with the cashflow of the business.
Also take a long hard look at your personal debts and get them under control.

It will be OK but it will be hard work.