Small business owners struggling to pay self assessment tax - accountants

I am seeing a sharp rise in business owners struggling to make their January tax payments this year, especially directors of small limited companies who were not eligible for grants during the lockdowns. With rising energy costs and pressure to increase staff wages, coupled with the increased cost of living for business owners themselves, many are having to make difficult decisions when it comes to prioritising paying their bills. In my experience, HMRC is very understanding when a taxpayer has trouble making payments but it is vital to communicate with them and put a payment plan in place as early as possible, ideally before the payment deadline. If you do expect your earnings to be lower in the current tax year you can apply to reduce your payments on account.

We are seeing an increasing number of self-employed clients who are not currently trading at the same level as the previous year due to the economic downturn, but are still expected to make the same level of first payment on account to HMRC based on previous earnings. This is creating huge worry and cashflow problems on top of already very stretched purse strings. There may be an opportunity to reduce these payments on account by arrangement with HMRC. However, if those payments do not cover the current tax year's liability, there may be additional interest payable.

Although we are seeing a small number of clients trading at a lower level than previously achieved, we are also seeing a great number of clients showing increased turnover levels as they continue to market and take advantage of the fact that their competition has decreased their marketing spend. We implement a simple cash management system into the majority of our client's businesses which means that they regularly save for their tax liabilities so in the main, they have more than covered their January tax liability. We have a couple of clients that need the Time to Pay facility but in the main HMRC tend to be accepting of this. They understand the pressure businesses have been under in recent years.

To be honest, many businesses have been struggling to pay their tax bills for the past couple of years. The SEISS grants for the self-employed caused major issues as quite a lot of clients were not expecting to pay tax on these. For limited companies, the Bounce Back Loans caused other issues as directors were drawing money from this to survive as they had no other funds coming in. As a result, we have a lot of clients with overdrawn loan accounts, causing more tax issues for companies already struggling. HM Revenue & Customs have been very supportive since COVID hit and the time to pay arrangements are working as people are still struggling to pay their tax liabilities when they fall due. There are a lot of companies offering finance facilities to pay outstanding tax liabilities, but you need to shop around for the best rate.