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Why you must seek advice before borrowing to pay HMRC debt

Date Added: 22/01/2016  

Obtaining personal credit can sometimes be easier than acquiring a business loan, leading business owners to consider personal borrowings as a solution to HMRC debt. However, transferring your liabilities in this way can lead to serious problems.
 
HMRC debt, whether it’s VAT, PAYE or Corporation Tax, usually comes about because there are fundamental issues with the business. If these issues are not addressed and you continue trading, having paid off the HMRC debt with your own borrowings, you are in a highly vulnerable position.
 
If the business does ultimately fail, and you are no longer able to service your personal borrowings, there is a real risk that you could lose your car or even your home, and potentially face bankruptcy.
 
Keeping the debts within your limited company will ensure you avoid this scenario and that you are not at risk of becoming personally liable for your business's HMRC debt.
 
It also means you are forced to reassess the business. If you want to continue trading successfully over the long term, restructuring the business will often help to secure the business’s future. Our business recovery professionals are experienced at assisting directors and business owners in this area.
 
Alternatively, you may find that you can enter into a Company Voluntary Arrangement (CVA), where only a portion of the debt is paid back. Or it may be that insolvency is the best option for your business. In either of these scenarios, paying the HMRC debt from personal borrowings will leave you substantially worse off, and probably kicking yourself that you didn’t take professional advice before you settled your debt with HMRC.
 
HMRC debt management and banking and finance professionals
 
There are a range of professionals who will offer you assistance regarding your situation, including your accountant, solicitor and bank manager. However, while these professionals are specialists in their specific areas, they are unlikely to have the depth and breadth of knowledge around HMRC debt management that enables them to talk you through your options and then help to negotiate the best outcome with the tax office. A debt recovery company can help you with all of this and more.
 
If you are suffering stress and sleepless nights over your HMRC debt and you want to talk to someone who can help, call 4R today on 0800 90 20 123. Remember, you need to take action quickly if you want to keep your options open, but however far along in this process you are, please take advice TODAY. You can also get in touch via our contact form.

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