What Happens When you Don’t Pay Taxes on Time?

What happens if you don't pay taxes

In the UK, your company needs to pay a range of taxes from Corporation Tax on the company profits to Value Added Tax (VAT) on the sale and purchase of the products. What happens if you don’t pay taxes?

If you fail to pay tax taxes on time, you have to bear the consequences. If your company is falling behind the deadlines, then expect action from HMRC. They can even shut the whole thing up. 

What happens if you don’t pay taxes

The tax situation for everybody is different, but here are some of the things that could happen if you don’t file your tax returns before the filing deadline.

In case you don’t pay VAT on time

Your company has to submit regular VAT payments to HMRC to stay in business. If you are keeping in line with the HMRC deadlines, then you only have to pay the base amount of VAT. 

You may have to face multiple fines and penalties as a consequence of falling behind your deadline. The first late payment may not cost you anything but after 12 months, a late payment will start to cost you dearly. 

In case you don’t pay PAYE on time

As a company owner, you deduct National Insurance contributions (NIC) and other taxes from the monthly payment of your employees as ‘Pay As You Earn.’ HMRC collects these taxes on a monthly basis.

If your company fails to comply with HMRC’s deadlines you have to pay a fine. PAYE should be submitted monthly. It will keep your company’s books up to date and the government will know how much you paid your employees in salaries. 

First-time late payment won’t cost you anything. Anything after that will have consequences. HMRC will charge a percentage-based penalty. The percentage is calculated on the basis of how many times your company defaults. 

Receiving an Accelerated Payment Notice (APN)

Companies in the UK over the years got involved in off-shore tax avoidance schemes. It significantly impacted the corporation tax companies needed to pay to HMRC. 

Your company will receive an Accelerated Payment Notice in case of involvement in any offshore scheme. The notice will intimate you to pay HMRC the due tax or face likely liquidation. 

HMRC is aggressive towards tax defaulting businesses. There are examples of businesses that are seized after falling behind. HMRC will exercise its power to seize the assets to recover the due amount. 

Successfully repaying HMRC tax arrears

HMRC’s ultimate goal is to recover the due amount at the end. This is the ideal solution for the tax body and also for your business. If your business continues to survive, you can always increase the revenue collection later. 

Time To Pay (TTP)

HMRC is keen to recover the owed amount, not seizing your business. Time To Pay is a similar kind of arrangement in which you can delay the payments of your business owed to the tax body. TTP will let your business pay its arrears over a designated period of time. 

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