With the income tax deadline fast approaching (31 October for paper filing and 15 November for on line returns) it is worth considering the implications of being unable to pay Revenue. If you find yourself in the position of being unable to pay the Revenue, simply sitting tight and hoping things will get better is not an acceptable approach. The first step to resolving tax payment difficulties is to file your returns on time and to engage with the Revenue at an early stage.
Filing your return on time will help avoid surcharges for late returns but could also increase the chances of Revenue agreeing an instalment arrangement. Your filing history with the Revenue will be reviewed as part of agreeing any instalment arrangement. Obviously if you have a history of non – payment of taxes or late filing of returns, this can be used as a reason by the Revenue not to enter an instalment arrangement with you.
Early engagement with the Revenue is important. In their guidance note “Dealing with Tax payment difficulties and engaging with the Revenue” it states that Revenue is disposed to working with such businesses and taxpayers to find a way through these difficulties provided there is early, positive and honest engagement with Revenue and the fundamentals of the business are sound.
As part of your engagement with the Revenue you will need to look at the viability of your business. Are the current cashflow difficulties temporary or do they signify a more fundamental problem, whereby the business is just not viable as a going concern. It would be worth getting an independent opinion on this before any decisions are made. If your business is viable you will need to calculate the full extent of your tax liabilities to include all taxes i.e. Income Tax, Value Added Tax, PAYE/PRSI and Relevant Contracts Tax.
You will then need to prepare realistic cashflow forecasts and from these you can prepare a payment plan for the Revenue. Once you have completed your cashflow forecasts and a payment plan you will need to complete the application form “Phased Payment Application” (PPA1). Along with this application form you will need to submit the following:
1) Up to date bank statements ( 3 – 6 months)
2) List of all assets and liabilities attached to those assets
3) An outline of what cost cutting measures have been implemented in the business including drawings by the owners / directors.
4) Cashflow projections for the following six months
5) Up to date management accounts
Items 4 and 5 will be required for liabilities in excess of €100,000 and may be requested for liabilities under €100,000. It is important to present a realistic proposal for repayment and you should also prepare to make a lump sum payment up front, usually amounting to 20% – 25% of the liability.
Where the tax liability is under €6,000 it may that a payment proposal can be set up with a single phone call to the Office of the Collector General, once all tax returns have been filed.
At Long & Company we have extensive experience of preparing instalment applications to the Revenue on behalf of tax payers. We can also provide an independent and objective view on the viability of your business. Please contact Stephen Connolly (stephen@longaccounts.ie) or Sinead Murphy (sineadm@longaccounts.ie) for further information or to arrange a consultation.