Can’t pay your taxes?
Can’t pay your taxes?
How to deal with your situation
An increasing number of people are having difficulty paying their taxes. Applications for instalment arrangements have soared as Revenue are being used as a lender of last resort. As a result, Revenue have imposed strict new criteria on instalment arrangement applications. Based on my experience in this area, I have outlined below how you should tackle the issue of Revenue debt.
1. Engage early:
Take action as soon as you think you’re going to have a problem. In my experience early engagement gets a more favourable response from Revenue and a better outcome. This applies to all taxes (income tax, VAT, PAYE, CT, CAT, CGT, etc). For example, if you think you won’t be able to pay your income tax liability in October you should prepare your tax return early. This will give your Tax Adviser more options when negotiating with Revenue.
2. Establish how much you owe:
When you’ve calculated the amount owed you need to consider if there is anything that can be done to reduce or postpone the liability. In recent cases I’ve dealt with we’ve managed to reduce our clients’ tax liabilities by restructuring their tax affairs and claiming additional reliefs.
3. What can you afford to pay:
You need to carry out a full review of your lifestyle, your business and your personal finances to establish what you can afford to pay. Extravagant expenditure should be reduced as Revenue won’t entertain an application if they feel your lifestyle is not in line with your financial reality.
4. What will Revenue look for:
Applicants will be dealt with courteously but rigorously. Revenue will require the following information which should be completed comprehensively and honestly:
i. Less than €100,000 – completed application form, Net Assets Statement, up-to-date bank statements, details of cost cutting measures, details of reduction in owner’s salary or drawings that reflects their distressed financial position;
ii. Greater than €100,000 – you are regarded as a significant risk. In addition to the information outlined above Revenue will look for detailed financial information covering all aspects of your business and personal affairs.
In all cases, Revenue will take a much harder line if you are looking for a tax clearance certificate. However, if your liability is less than €6,000 the process should be fairly straightforward. Revenue will only require a minimum of information, particularly if you can pay it off in less than 12 months.
5. Instalment arrangement:
In general Revenue will look for a payment up front with the balance payable by monthly instalment over 12, 24 or 36 months. In most cases Revenue will charge interest and may also impose penalties. In my experience the taxpayer’s precarious financial position clouds their judgement and hinders their ability to negotiate the best deal. Most terms are negotiable and an experienced Tax Adviser familiar with the unwritten rules can usually deliver a better result.
Once the instalment arrangement is in place ongoing returns and taxes must be kept up to date, otherwise Revenue will seek immediate collection of all outstanding taxes. If you ignore Revenue demands they will eventually enforce collection by sending the Sherriff to collect the money or seize assets of equivalent value. Alternatively, it may be given to Revenue Solicitors who will take you to Court where they can seek an Attachment Order against rental income, salary, bank deposits, etc. This means part of your salary, rent, etc would be paid directly to Revenue by your employer, tenant, etc. If you think you’re going to miss a payment or filing deadline you should contact Revenue immediately. In genuine cases they may agree to reschedule the repayments.
- Confront your problem and take action now
- Calculate the full extent of your liabilities and reduce them where possible
- Compile full and honest information on your financial position
- Prepare well before contacting Revenue and engage a professional if required
- Decide on a negotiation strategy that includes a plan B should your application be refused.
If you are having difficulty paying your tax liabilities take action now. Contact your Chartered Tax Adviser or alternatively you can contact me to discuss your particular circumstances:
Kenneth Garvey BA FCCA AITICusack Garvey Chartered Tax Advisers 29 The Rise Mount Merrion Co. Dublin
Telephone +353 (0)1 210 8455
PS: Please feel free to pass this on to anyone else who might find it useful.
Copyright Cusack Garvey May 2012