The Collector Wants Your Money!
Newsletter issue - September 07.
Tax demands are never welcome, but sometimes they come out of the blue. If you have received an unexpected tax demand, don't panic. The Taxman does get his calculations wrong, even in the most straightforward of cases, so please ask us to check that the amount demanded is correct.
Once you know the tax due is correct, you need to work out how and when you are going to pay it. Look carefully at the tax statement; it may be asking for the tax to be paid at some point in the future and to cover more than one tax year. Income tax and capital gains tax for 2006/07 will be due on 31 January 2008, with an on-account payment due on the same date for 2007/08. Where the tax demanded for 2006/07 was due to a one-off jump in your income, you can ask for the estimated tax payment for 2007/08 to be reduced, perhaps to nil.
Where you owe less than £2,000, the tax can be collected through your PAYE coding for 2008/09. This will spread the tax payment over a whole year, so will be far less painful. You can ring the Taxman and ask him to adjust your PAYE code number, or we can do that for you.
If the tax is due immediately, such as late paid PAYE or corporation tax, don't put-off dealing with the demand, as the consequences of not paying the Taxman can be pretty serious. If you are registered under the CIS to receive payments without deduction of tax, paying any tax late could mean you lose your gross payment status. That could seriously hit your cash flow.
When you receive a letter from the local Collector of Taxes (now called Recovery Office) you need to respond quickly, as these guys have a short fuse. If you really can't pay all the tax due at once you can negotiate for time to pay, but that will usually mean presenting a list of your assets and liabilities to prove you do not have the funds. If you ignore letters from the Collector you could soon find bailiffs on your doorstep ready to seize your goods, including your car.
The Taxman can also take you to court for non-payment of tax, either to the local Magistrates for relatively small debts or to the County Court. If you lose the case you could be made bankrupt.