Home For accounting professionals General accounting discussion
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚


Client can pay Corporation Tax

RachelRachel Trusted RegularFMAAT, AAT Licensed Accountant Posts: 349
Can't pay sorry

Hello

I am looking for a bit of advice on the best way forward.

Client needs to pay ct bill by 31/8/11 and can't. He is in the process of selling his house and so won't be able to do so for a few months.

I have never had this before will HMRC negotitate a payment plan with him? Does anyone have any experience of this.

He hasn't included anything for use of home, would it be worth reducing tax bill by setting up a rental agreement and declaring rental income on his self assessment. Hence delaying the liability or is this a no no.

Any other ideas

Many Thanks

Comments

  • jiltjilt Font Of All Knowledge Registered Posts: 2,903
    I've negotiated a payment plan with HMRC a couple of times for a client, was quite painless really.

    If you were to set up a rental agreement for use of his home wouldn't he be open to CGT if and when he sold it?
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    They will not accept a time to pay if the company has paid dividends.

    However, if they make regular payments of what they can afford, and pay the balance in a few months, there isn't much HMRC can do about it.

    You should definitely be claiming a use of home rent regardless but this won't delay the tax liability.
  • jiltjilt Font Of All Knowledge Registered Posts: 2,903
    Jenni, could a rental agreement cause a CGT liability,?
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Not if it's done properly, no.

    i.e. the rental contract (and you put one in place, for sure) specifies non exclusive use of the room(s) in question
  • jiltjilt Font Of All Knowledge Registered Posts: 2,903
    Thanks hun x
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    Monsoon wrote: »
    They will not accept a time to pay if the company has paid dividends.

    I have never had that as a problem for any of my companies.

    Just get your client to call the Business Payments Support line on 0845 302 1435. Make sure they do so before 31st August as they won't deal with it after the due date.
  • groundygroundy Trusted Regular Registered Posts: 495
    Dean

    Would have agreed with you last year and in this case you are probably right. However, if it is the second year of calling the helpline I would agree with Monsoon. We have had a few clients recently turned down for a payment plan due to taking dividends. HMRC need to start living in the real world!

    Also agree with Monsoon in that were are clients have been turned down I have told them to pay what they can when they can. Apart from the odd letter stating legal action can be taken and that the debt is accruing interest HMRC seem to leave the client alone.
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    Interesting. Will definitely have to monitor that one.
  • RachelRachel Trusted Regular FMAAT, AAT Licensed Accountant Posts: 349
    Thank you everyone for your responses.

    He has called HMRC who I think have referred him to his bank.

    He has a Directors loan account of just under £5k but no dividends finalised as yet.
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    HMRC have refered him to his bank? Unless the company can get a loan without a directors personal guarantee (unlikely) I would not recommend a client take out a bank loan to pay the tax, as this defeats the point of limited liability.

    If a director has taken too much money out, he owes it back. I don't believe in general a director should ever suffer his own personal funds to pay company tax. HMRC will try and tell you otherwise, but it doesn't mean they are right.
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Dean, the issue with dividends and TTP is a recent one, a lot of practitioners are reporting that the BPS line are taking this stance.

    I'm advising all my clients that if they can't pay on time but can in a few months, to pay what they can as soon as they can - if they are making regular payments, a court will see that and will probably chew HMRC out for taking it to court if and when it got there, because the company is clearly paying what it can.
Sign In or Register to comment.