Secretary of State for Business Kwasi Kwarteng has reassured businesses that HMRC will not take a hard line when it comes to corporate debt to government. In a letter to business groups, Kwarteng says that government will take “a cautious approach to enforcement of debt owed to government that will have accrued,” the FT reports.
The move comes as many businesses are still feeling the effects of the Covid-related downturn. Hospitality and retail sector businesses in particular have faced difficulty repaying accumulated VAT and other tax debts.
Negotiated repayment terms
However, we also noted that the HMRC guidance urges businesses that have failed to meet their payment deadlines to contact the tax authority. In principle, companies can arrange to make payments at an agreed future date and minimise penalties incurred.
Breathing room, not a free ride
Many businesses have emerged from 2020 facing a serious liquidity crunch. However, businesses should note that regulators still require ongoing engagement. A more flexible approach to VAT enforcement nonetheless requires urgent action on the part of business.
HMRC says that they “will always work constructively with customers to avoid the need for insolvency and will only take action if a customer does not respond or engage with us.”
That final clause is key. Businesses that are unable to meet their VAT obligations need to engage with authorities as quickly as possible. It’s the key to ensuring more advantageous and flexible terms of payment.
In such cases, companies will also benefit from consulting with vat experts who have experience liaising with HMRC. Moreover, VAT specialists can help you optimise your VAT, ensuring you maximise reclaim opportunities and take advantage of mechanisms that can alleviate your cash flow.
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