Help!!! I can’t pay my taxes!

Many businesses are finding it difficult to make ends meet and pay their creditors when they fall due.

Arguably, one of the most feared creditors of businesses is Revenue. Why?

Substantial interest, penalties, surcharges and potential fines and prosecution if you get it wrong.

In extreme cases Revenue can place an “attachment order” on your debtors and freeze your bank accounts. An attachment order is where Revenue instructs your customers that owe you money to pay it directly to Revenue. If this happens you lose control of your cash-flow and writing is on the wall.
It must be stressed though, that attachment orders are relatively rare and are a last resort which are not taken lightly by Revenue. Non co-operation and/or a history of non-compliance are key factors in such cases.

If you find yourself in the unfortunate position of being unable to pay Revenue, there are 2 golden rules:

File your returns on-time even if you can’t pay.

Even if you can’t pay you need to maintain your compliance record with Revenue. This will help you avoid surcharges for late returns and increase the likelihood of Revenue agreeing an instalment plan with you. If you have a history of late filing and payment Revenue may cite this as a reason for not agreeing an instalment plan with you, ie the will consider you too high a payment risk.

Engage early & co-operate

Revenue’s guidance document Dealing with Tax Payment Difficulties and Engaging with Revenue, states:

The extent of the room for manoeuvre by a manager is significantly influenced by the level and timeliness of meaningful engagement
by the business in the first instance. Non-compliance with this condition is treated as a serious escalation of the risk associated with the case requiring immediate and effective response by Revenue.”

You also need to look at your business and determine whether the business is viable and this is just a temporary cash-flow problem, or whether there is a more fundamental issue and the business isn’t viable. You should probably get an outside, objective view on this.

My business is viable what can I do?

  1. Calculate the FULL extent of your liabilities
  2. Engage with Revenue – inform them of your pending payment difficulties: don’t wait until after the due date
  3. Prepare a repayment plan, based on realistic cashflow forecasts

You will probably be directed to Form PPA1 Phased Payment Application. You will need to submit the following with the application:

  1. Recent bank statements
  2. Lists of assets and liabilities secured on those assets
  3. Outline of cost cutting measures implemented
  4. Cashflow projections
  5. Recent management accounts

Items 4 and 5 will be required for debits over €100,000 and may be requested for debts below €100,000. For small amounts (less than €6,000) Revenue suggests that you contact the Collector General’s Office to determine what documentation should be submitted.

Taxpayers should approach this as they would an application for any credit facility. It is important to be open and honest in your negotiations and discussions. The most important thing is to present a realistic proposal for repayment and to be able to support that with evidence of your ability to meet your repayments. You should also be prepared to make a lump-sum payment up front, followed by a series of instalments.

Once the instalment plan is place it is important to stick to it. Revenue may renegotiate once but this will increase your risk profile in Revenue’s eyes, increasing the likelihood of default and may result in additional enforcement measures.

What if Revenue won’t agree to an instalment plan?

You should be prepared for this just in case. Ultimately you may need to seek finance from other sources, but this may be limited as if Revenue won’t get you credit will the banks?

If you are turned down you need to find out why. What were the weaknesses in your application? How do you address those weaknesses?

In summary:

  1. File returns on-time
  2. Engage with Revenue
  3. Make timely responses to all Revenue correspondence, even if it’s just to acknowledge receipt and to notify Revenue that you are dealing with it
  4. Be realistic in your analysis of your business and your forecasts
  5. Stick to the agreed plan
  6. Have a contingency plan

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