Company tax problems can affect thousands of businesses each year for a number of reasons, the effect of which can be stressful for anyone operating a business. An inability to pay tax and accruing arrears may be an indication of potential insolvency.
No healthy business should find itself with tax payment issues and can point to other areas of the business where matters need to be resolved. Some problems that can lead to tax arrears include:
- Poor financial advice
- Poor accounting procedures
- Errors in tax calculations
- Delays in VAT registration for new businesses
If the above areas of the business are functioning correctly then tax arrears may be as a result of liquidity issues. These can be more difficult to both identify and solve pointing to a fundamental problem with the business. Some potential causes may be:
- Ineffective Management teams
- Difficult trading conditions
- Poor business decisions
- Withdrawal of backing from creditors
- Poor planning
- Unforeseen events such as a fire or important staff leaving the company
Dealing with Tax Problems
It is important to deal with tax issues as soon as they arise. Failure to do so will lead to interest and penalties being levied followed by “enforcement action” being taken via a number of options available to HMRC.
In this regard it is advisable to seek professional advice to assist in reaching a revised payment schedule with HMRC that is acceptable to them and enables the business to continue to trade.