As a business, if you can’t pay your VAT bill there can be serious consequences. Setting up VAT payments is one task that needs to be taken care of, otherwise your business may face legal action.

What is VAT?

VAT or Value Added Tax is a form of consumption tax. It is a tax that is placed on spending on goods and services. In places like America there is no VAT placed on products simply because there is another kind of tax used. They have a sales-tax which differs from state to state.

VAT in the UK needs to be paid to the HMRC (Her Majesty’s Revenue & Customs). As a business, if you’re selling any products or services to anyone then you must be registered for VAT. It is something that you should be charging your customers on top of what they are already paying.

What happens if you don’t pay?

There are legal ramifications for business that don’t pay VAT. The first step that will be taken against is you will initially be sent a written demand for payment and failure to adhere to this letter will then result in a bailiff or customs officer coming to your business or home. This is known as distress action.

Next you may receive a county court summons. If this goes against you there are a number of things that could happen. The first being that you won’t be able to obtain credit, so if you were trying to get a mortgage for a house in future you may be refused it. You may have a legal charge placed on your property or even worse you may have your goods and assets sold so that you can afford to pay off what you owe.

The HMRC are in charge of making sure that all taxes in the country are paid on time and in full. There is a dedicated section on their website which you can view here if you are struggling to meet any payments as far as VAT is concerned with details on what could happen if you don’t pay your VAT bills here.

Firstly, what is corporation tax? For the unfamiliar, this is a tax that must be paid by a business based on the amount of profit that particular company has generated. The amount of tax that has to be paid varies and it is determined mainly by the region in which the company is based.

Corporation tax is paid to the HMRC and if you find that you are going to struggle meeting the payment deadline then you should get in touch with HMRC immediately. If you don’t, they can take legal action to recoup the debt.

If you are new to corporation tax then HMRC have a more in-depth guide which you can find here.

So what if I can’t pay my Corporation Tax?

If you find that you are struggling to meet payment deadlines for corporation tax then you should get in touch with HMRC and let them know that you won’t be able to meet the deadline. You can arrange a payment plan under their ‘time to pay’ scheme which should make it easier to handle the outstanding balance.

In the event that you can’t make the payments you should contact the HMRC and discuss your situation with them. If you don’t contact them then you will receive reminders through the post and a further breach of the agreement can result in HMRC taking legal action to recover the debt that they are owed.

It’s wise to pay your corporation tax as soon as you know what you owe and when it needs to be paid. HMRC have the power to obtain payment by seizing your business assets and selling them off at auction.

In the worst case scenario you may be subject to HMRC applying to the courts to have your business closed down. If you think that you may struggle to pay your corporation tax then you can read more about what may happen to you and how to do something about it here.

If you find that you are in this boat and want to seek some advice about what to then you should look for business debt advice from Real Business Recovery. With a 14-strong team and wide-ranging experience in this area, we can help avoid the pitfalls of corporation tax debt and make a new start for your business.

If you have failed to pay the HMRC then you may be facing a court hearing as a result of your failure to pay your outstanding bills or taxes. As a business, being taken to court by the HMRC is the last thing you want to happen as it’s only going to end badly; especially if you haven’t paid your taxes.

What is the HMRC and why might they take you to court?

The HMRC are a government body that are responsible for making sure that money is available to fund the UK’s public services. If you’re struggling to pay any balance then you should contact the HMRC sooner rather than later.

If you do contact them, then they may grant you extra time to pay off what you owe under their ‘time to pay’ scheme, otherwise you could be in for a rough ride. HMRC are known for taking businesses and people to court over unpaid debts and if the court case goes against you then in the worst case scenario, you could potentially see your business closed down by the court.

What options do I have?

There are a number of different options open to you. If you’re having cash flow problems then you can contact the HMRC and you will be given a maximum of 14 days to outline a plan to show them how and when you plan to pay off your debt. There are alternate ways of paying – If you know that you will have the money to pay off your debt by a certain date then there is a certain amount of flexibility.

Another option is to speak to the HMRC and arrange to pay off your debt in instalments. This tends to be a bit easier than paying it off in one go if you’re struggling for cash.

Failure to pay outstanding debts

This will inevitably result in you personally, or your company being taken to court, which isn’t something that you really want to happen. Firstly you will be taken to a magistrate’s court. This happens to businesses or individuals that have owed £2,000 or less for no more than a year. Failing this you will instead be taken to a County Court.

If you find that you’re in a situation where you owe money then you should contact someone or a company who will be able to help you. Real Business Recovery are an ideal company to see about business help. With extensive experience in areas like business bankruptcy and factoring we are ideally equipped to help you deal with HMRC debt.

If you want to read more about the HMRC’s procedures when it comes to collecting their debts then you can read more from their website here.

JJB Sports was founded way back by ex-footballer Dave Whelan in Wigan. It is now a national chain of sports stores and it currently has 251 stores operating in the UK and Ireland.

They have seemingly stumbled by; dragging their feet in recent years after sales significantly dropped resulting in huge losses. JJB’s shares have fallen yet again by 20% and it has sparked fears that there could be a huge loss of jobs.

JJB have struggled in recent years, even though they have had a cash injection of £96million from investors and shareholders including Bill Gates. This money was given to JJB sports in a bid to help fund a turnaround plan.

We could be witnessing a real business recovery if JJB do manage to come back from this. Also, it could go the other way and just continue to get worse for the company. If it gets worse they may have to agree to a CVA or even worse pre pack administration.

An analyst from Seymour Pierce, Freddie George, has said that the company’s full year losses are set to reach £60 million and they won’t have any chance of breaking even until at least 2014.

They are however, confident that they will see an uptake in sales with next year being the London Olympics and also the European Championships. They have also covered all bases and with just £17m in the bank they insist that their forecasts for the next 12 months are pretty accurate and that they will have sufficient money to see them through.