In the current economic climate, businesses are finding it increasingly difficult to meet their current tax obligations to Revenue. Delays in being paid for goods and services put an enormous strain on the ability of a business to survive.
Since the days of the Celtic Tiger, Revenue have softened their attitude to payment of tax arrears significantly and are now more sympathetic towards those businesses that have fallen into difficulty. This means they are willing to enter into installment arrangements which stretch over longer periods then before and are more agreeable to reducing penalties where possible.
However the revenue will not accept a situation where the business is allowed to continue to run up revenue debts with no realistic basis or time-frame of payment.
It is also worth noting that revenue cannot waive the underlying taxes themselves as a point of law. Nor can they waive the interest arising. The only way such debts can be extinguished is by liquidation of the company.
So when you find that you are in difficulties with the revenue for unpaid taxes what is the best thing to do?
Find out what is causing the difficulties.
First you must figure out exactly what is the cause of the problem. Vague phrases such as “we are having difficulty getting paid” or “the sales are down from last year” will not be a sufficient basis for an agreement with the revenue.
You need to have definite facts and figures available and a reasonable plan to solve all of the issues you have uncovered. Most important of all, you need to be able to show that the business is viable long term.
Engage with revenue
Once you have all the facts, you then need to engage with revenue at the earliest opportunity with a proposal on how to clear all of the current taxes. This proposal needs to be a realistic one as if the agreement is not kept to, the amounts due will precede to enforcement immediately.
You should have management accounts, cash flow statements, debtors’ lists, company profile etc to support your case.
Installment arrangements
Most arrears of tax are dealt with by entering into an installment arrangement with revenue. A certain amount of the outstanding tax will always need to be paid up front. The upfront payment should be as large as possible to reduce interest costs.
Breach of the installment agreement will have serious repercussions and will entail immediate enforcement measures. Part of the conditions of the agreement will also be that any current taxes arising are kept up to date and do not fall into arrears.
Remember if you are trading as a sole trader you remain personally liable for all arrears of taxes. If you operate as a limited company and you engage in fraudulent trading or allow your company to be involuntarily struck off at the CRO and continue to trade, you could also have personal liability.
If you wish to discuss any of the above do get in touch with us at info@irishaccounts.ie
The information contained in this blog is for general guidance on matters of interest only and should not be construed as professional advice or service.As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers.