Well over half a million UK individuals and businesses are so far behind on their tax bills that they have been forced to reschedule their payments with HMRC, with the loan charge a factor
The latest HMRC data covering the period to June this year, analysed by UHY Hacker Young, found that 681,000 people and companies have opted for ‘time to pay’ arrangements which have to be formally agreed with the tax authorities and allow for longer periods to pay tax due.
UHY Hacker Young says that the Brexit-related and broader slowdown of the economy has put the finances of small businesses and individuals in a squeeze, making it harder for them to pay their tax bills.
Insolvency Service figures show the number of individuals entering insolvency rose by 14% to 121,700 in the last year alone.
Loan charge impact
HMRC’s loan charge is another likely reason for the surge in the number of taxpayers forced to ask to negotiate time to pay arrangements, as it requires individuals who used disguised remuneration schemes who have outstanding debts to pay all the outstanding tax in one lump sum.
Clive Gawthorpe, partner at UHY Hacker Young, said: ‘With the economy putting both small businesses and personal taxpayers under so much pressure it’s no surprise that people are struggling with their tax bills.
‘What is surprising is it that it is now affecting more than half a million taxpayers.
‘However, time to pay arrangements remain notoriously difficult to agree with HMRC. Even when HMRC does agree them, they usually only last for one year. Many people need more time than that.’
HMRC is taking a slightly different stance with taxpayers affected by the loan charge, as UHY said it had seen some instances of HMRC agreeing to payment plans of up to three years for some of those individuals. The loan charge is also under review at the moment and is set to report back in November following an independent review of the parameters of the scheme led by Sir Amyas Morse.
Gawthorpe said: ‘There are some areas where HMRC is being more accommodating, but that does not mean an agreement is guaranteed in any circumstance. People must be aware that these arrangements can take time to negotiate, so approaching the Revenue sooner rather than later is likely to be the best tactic.’