Tax issues are becoming more and more common. Certainly among my invoice factoring clients I have seen a recent rise in clients with HMRC arrears and no repayment plans in place.

12-18 months ago HMRC seemed more than happy to support SME’s during the credit crunch. HMRC were to many businesses the lender of last resort. However, there seems to have been a change in their attitude and when negotiating a repayment plan they are being aggressive and unfortunately in many instances unrealistic.

One of my invoice finance clients had been hit with a bad debt for £150,000. Although the business was and is profitable they racked up arrears on VAT and PAYE of £100,000. They survived the bad debt and were able to maintain their current HMRC liabilities once out of the rut but the arrears remained. In negotiating a repayment plan HMRC wanted full repayment within 9 months. Our client is in the haulage business and oprates on small margins – this repayment plan was simply impossible.

That said our client was happy to agree this because he had enough money to make the first payment and would worry about the balance later. HMRC had given him the alternative of a 9 month repayment plan or the would wind them up. Of course he wanted to accept the offer.

A lot of these people have never had arrears before and as such are inexperienced with dealing with HMRC. In talking to a business associate who specialises in negotiating with HMRC he believes businesses should stand their ground and demonstrate what is achievable. He has managed to negotiate time to pay agreements over 5 years but accepts the average is about 3 years.