1 Introduction
1.1 Who should read this practice note?
Solicitors who anticipate future financial difficulties, particularly in relation to their tax returns due in January 2009 and other tax liabilities.
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1.2 What is the issue?
Many practices are experiencing financial difficulties due to the economic downturn.
HM Revenue and Customs (HMRC) have introduced a Business Support Service to help you weather the current economic conditions by assisting both large and small businesses unable to pay their tax. The service was launched on 24 November 2008, and deals with all values of debts that are becoming due, although some larger and more complex cases may need to be referred to a specialist to deal with. Debts which are overdue may also have to be referred to a specialist who will contact you within four working days.
The service is primarily available to self-employed people and companies but can be used by anyone who is having difficulty in meeting their tax liabilities. It covers most taxes and duties including income tax, corporation tax, VAT, PAYE and national insurance.
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2 Who is eligible for deferral?
To qualify for deferral, you will need to be:
- in genuine difficulty
- unable to pay your tax on time
- likely to be able to pay your tax if HMRC allowed you more time.
HMRC undertakes to be flexible and agree time to pay arrangements on a case-by-case basis to bring your business back up to date within an agreed timescale.
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3 How to apply
When you call the Business Support Service, you will need to provide all of the following:
- your tax reference number
- details of which tax you are, or will have, difficulty paying
- the amount of debt, or anticipated debt
- why you are in difficulties
- how long you will need to pay
- basic details of your business' income and outgoings.
Most applicants will be given a decision over the phone. More complex cases are referred to another office, the turnaround for which is around four days.
You can call HMRC's Business Payment Support Line seven days a week on 0845 302 1435. The lines are open:
Monday - Friday: 08:00 to 20:00
Weekends: 08:00 to 16:00
Or visit the HMRC website.
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4 How to avoid surcharges
If you contact HMRC before the payment is due and agree a payment arrangement:
- You will not be charged VAT default surcharges.
- Entering into such an agreement will not be treated as a default so it will not extend the twelve month rolling period.
- The default percentage will not increase because of the arrangement.
The above remains true provided, and as long as you adhere to the terms of the arrangement.
If you become unable to keep to an arrangement entered into with HMRC, or this becomes likely, you should contact HMRC straight away and certainly before missing a payment. In such cases, HMRC will look to see if it can reschedule the payments or extend the agreement, provided your business remains viable.
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5 Interest on tax deferral arrangement
The interest charged, where it applies, will be at the HMRC's published rate which is currently between 2.5% and 3.5% depending on the tax that has been deferred.
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6 More information
6.1 Status of this practice note
This is interim advice. Practice notes are issued by the Law Society for the use and benefit of its members. They represent the Law Society's view of good practice in a particular area. They are not intended to be the only standard of good practice that solicitors can follow. You are not required to follow them, but doing so will make it easier to account to oversight bodies for your actions.
Practice notes are not legal advice, nor do they necessarily provide a defence to complaints of misconduct or of inadequate professional service. While care has been taken to ensure that they are accurate, up to date and useful, the Law Society will not accept any legal liability in relation to them.
For queries or comments on this practice note contact the Law Society's Practice Advice Service.
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6.2 Practice Advice Service
The Law Society provides support for solicitors on a wide range of areas of practice. Practice Advice can be contacted on 0870 606 2522 from 09:00 to 17:00 on weekdays.
Read more about the Practice Advice Service.
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6.3 Products and services
Law Society publications
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6.4 Acknowledgements
- HMRC Business Support Service
- Law Society Tax Law Committee
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