Why do Tax Arrears Arise?

Some of the circumstances which lead to tax arrears can include the following:

• Errors in calculation.
• Incorrect use of VAT schemes.
• Delays in obtaining VAT registration and/ or tax clearance for new businesses.
• Inadequate accounting systems and procedures.
• Poor advice from external advisers.

Now, what happens if you haven't got the cash to pay off the tax arrears immediately? In this case, it is highly likely that your business has liquidity problems and there are potentially more fundamental reasons which have given rise to your tax arrears. These factors may include the following: Problematic industry or sector.

• Over-trading.
• Inefficient operations & lack of planning on major strategies such as acquisitions, diversification, expansion and relocations.
• Undercapitalisation and/or underinvestment.
• Loss of confidence from funder(s) and withdrawal of facilities.
• Loss of credit insurance.
• Internal fraud or theft.

If one or more of the above events has occurred you are likely to have fallen behind on payments to your suppliers and into tax arrears with HMRC. This, however, is often not the end of the matter. The only way to successfully address your liquidity issues and therefore your tax arrears is to establish and deal with the root cause of the difficulties. This is where MCR Tax Arrears Solutions come in. Our expert turnaround and tax arrears advice helps businesses to tackle their tax issues head on and ensure that they put in place long term measures to prevent tax arrears from occurring in the future.

As part of your turnaround plan, managing your cashflow, raising new finance and securing payment plans with all your creditors including HMRC are all critical matters to attend to.