If your company owes HMRC money, there is a crucial window before HMRC contacts you. Chris Worden explains the four essential steps directors should take to strengthen their position before that first HMRC conversation.
- Prepare before HMRC contacts you
- File all outstanding tax returns
- Calculate your exact tax liabilities
- Work out a realistic repayment plan
- Be careful with your words during the first HMRC call
Why Preparation Before HMRC Calls Matters
The period before HMRC makes contact is critical. Many directors miss the chance to improve their position simply because they are unprepared. Taking the right steps early can help you avoid unnecessary escalation and give you more control over negotiations.
The Four Key Steps to Take
1. File All Outstanding Tax Returns
Even if you cannot pay, ensure every tax return is filed. HMRC estimated assessments can inflate your debt, so accurate returns are vital. For more on managing tax debt, see HMRC Arrears & Tax Debt.
2. Calculate Your Exact Tax Liability
Understand your VAT, PAYE, Corporation Tax, and other liabilities. Add them up for a clear picture of what you owe. This helps avoid surprises during negotiations.
3. Work Out a Realistic Repayment Figure
HMRC will want to know what your business can realistically afford to pay. Build a cash flow forecast based on your actual income, not just your best months. A sustainable payment plan is better than an ambitious one you cannot maintain. If you need help, consider a free consultation.
4. Prepare for the First HMRC Call
Treat the first call as a negotiation. Avoid admitting to using VAT for other purposes or discussing insolvency plans. Focus on what happened, where you are now, and what you can afford. Sometimes, using an experienced adviser like Chris Worden can make a significant difference.
Common Mistakes to Avoid
- Not filing all returns before speaking to HMRC
- Promising unrealistic monthly payments
- Making statements that could harm your position
- Failing to prepare a cash flow forecast
How a Time to Pay Arrangement Can Help
A realistic Time to Pay Arrangement can prevent further HMRC escalation. Even a smaller, sustainable payment is better than missing larger payments. For more on negotiating with creditors, see Company Voluntary Arrangement (CVA) and Liquidation & Company Closure.
When to Seek Professional Help
If you are facing creditor pressure, enforcement action, or complex tax issues, it may be time to get expert advice. Chris Worden and the team at Director First can guide you through your options. Learn more about Chris Worden or visit our Info Vault for more resources.
Key Takeaways
- Act before HMRC contacts you for the best outcome
- File all tax returns, even if you cannot pay
- Know your exact tax liabilities
- Offer a realistic, sustainable repayment plan
- Be strategic in your first HMRC conversation
FAQs
- What should I do before HMRC contacts me?
- File all outstanding tax returns, calculate your total tax liability, prepare a realistic repayment plan, and plan your first conversation carefully.
- Why is it important to file tax returns even if I cannot pay?
- Filing accurate returns prevents HMRC from inflating your debt with estimated assessments and shows you are acting responsibly.
- How do I calculate a realistic repayment figure for HMRC?
- Build a cash flow forecast based on your business's actual income and expenses, and offer a payment you can sustain even in tough months.
- What should I avoid saying during my first HMRC call?
- Avoid admitting to using tax money for other purposes or discussing insolvency plans. Focus on facts and your ability to pay.
- When should I seek professional help with HMRC arrears?
- If you face complex tax issues, creditor pressure, or enforcement action, consult an experienced adviser like Chris Worden.
