HMRC Pressure – Insolvency Avoided!

Insolvency Practitioners, Avoiding Liquidation and a Relieved Client

As insolvency practitioners, we don’t only deal with liquidations and business closures. We welcome opportunities where our business insolvency advice can avoid liquidation and achieve a more positive outcome. This is exactly what we were able to do recently for a client who runs a very worthwhile business that encountered a major VAT issue that looked like it might be terminal. We’re grateful to them for this testimonial.

A VAT Assessment Resulted in HMRC Demanding a Significant Sum

Our client is a Community Interest Company providing counselling and support services to individuals to help cope with a range of mental health issues. Their funding comes from a combination of grants and income generated by providing its services to corporations and local authorities.

All was running smoothly until a problem arose out of the VAT treatment of its invoiced services and a misunderstanding as to the correct VAT treatment. A VAT inspection by HMRC resulted in an unexpected assessment requiring payment of a significant VAT assessment.

The Company simply didn’t have the resources to pay this large sum immediately and closure of the Company seemed the only real option. 

Our Business Insolvency Advice and Discussions with HMRC Turned Things Around

There was a positive, however, and that was that the invoiced services side of the Company was growing. So although the debt could not be paid off immediately or in one go, it was felt that surplus funds could be generated over time to repay the debt.  As a result, the Board of Directors were confident that the debt could be repaid. However, their initial trading forecasts suggested a period longer than the maximum 12 months that HMRC tend to allow, and there was concern that HMRC pressure could prove difficult to overcome.

We Were Engaged and Started Talking to HMRC

We often come across clients who feel worried or even a bit intimidated talking to HMRC. As insolvency practitioners we do it all the time, so have good insight into how they work and what they want.

We spoke to HMRC straightaway to let them know we were on board and advising the Company. We were able immediately to secure a window of time in which to put together details of an offer to settle with HMRC. We spent that time with the Board reviewing and challenging the cash flow projections to ensure they were robust and realistic. We concluded that a realistic and achievable repayment period of 16 months would be required, although it could not start straight away.

We Took the Offer to HMRC and Negotiated an Agreement

We discussed the background and detail of the offer with HMRC, who took the time to understand the rationale for the offer.  It was a “big ask”, because:

• The commencement of repayments needed to be delayed by two months,
• Thereafter, monthly payments would start low and then increase over time, BUT, could be subject to occasional fluctuations.

We knew that it was a waste of time promising payments based on the sum required divided equally over 12 months – that wouldn’t fit the cash flow profile of the business. Our experience with HMRC is that they will listen to honesty and realism. It certainly helped having an Insolvency Practitioner review the accuracy of the cash flow forecasts and provide independent verification as to the merits of the offer.

Agreement was Reached. Liquidation and Closure was Avoided

We eventually agreed a profile of payments over a 16 months period and HMRC even offered an extra month to ensure the promises made could be kept!

The feedback from the Board of Directors was very positive:

“Dealing with multiple tax offices and letters compounded by never getting through to the same person twice was causing a lot of stress and pressure as we just couldn’t resolve the matter ourselves. As a growing business having Poppleton Appleby ‘in our corner’/ ‘on board’  meant that we were able to quickly construct a realistic cash flow, review all areas of the business and approach HMRC with a realistic proposal. This was accepted, leaving us time to grow our expanding business with the security of knowing that a monthly payment to HMRC will settle the bill.

The team at Poppleton & Appleby sought to understand the issue and put forward options for us as a company. They responded in a friendly, quick and efficient manner throughout whilst asking those difficult questions that needed to be asked.”

It is good to be able to report a success story that didn’t have to end with the closure and liquidation of a business. In this particular case, we are especially pleased to have helped a Company with an important goal – to provide help and support for those having to deal with mental illness, a cause which is now being discussed nationally and more openly than ever in recent months.

Talk to our Insolvency Practitioners for Help and Advice

If your company is facing financial difficulties, talk to us for business insolvency advice. Talking to insolvency practitioners, such as our team at Poppleton & Appleby here in Birmingham, could mean we can help turn things around, and avoid liquidation and closure. The earlier you contact us or call us on 0121 200 2962, the more we can do to help.