Have tax payments that are due, or worse, overdue?Some accountants are questioning the recent advice by HM Revenue and Customs to many businesses.
That advice is to pay taxes with a credit card instead of deferring payments.
But just how wise is this and why would HMRC suggest it? HMRC charges 1.
25% for accepting a credit card; a fee it keeps.
But could that really be the reason it's been suggested? Most likely not, say some accountants.
Still, those same accountants admit they're at a loss as to why a business that is struggling to make its tax payments would go further into debt by using a credit card, with high interest rates, to pay a tax bill.
One tax partner at UHY Hacker Young, Roy Maugham, says, "Credit card payments are an expensive way to pay a tax bill.
If a business is struggling for cash flow, the last thing it needs is another credit card bill".
On the other hand, HMRC is defending its practices and says that while it's not changed its policies or criteria for extending time for companies that face temporary financial difficulties, it does continue to require that business to convince HMRC that it has not other means of raising money to make their tax payments.
One of those ways that must not exist is the ability to rely on a credit card, regardless of how much interest a business might have to pay the credit card company.
It defends the 1.
25% transaction fee by saying the law requires it.
Others says this is just another way HMRC drops the ball in its sensitivity efforts, especially in tough economic times.
One solution that's been suggested many times is a grace period.
Many say a six month grace period is all most businesses would need to get past temporary money problems.
Accountants across the UK agree and say a true temporary cash flow problem rarely, if ever, exists for more than a few months.
HMRC has long since warned businesses not to rely on the Time To Pay program designed to help businesses defer tax payments.
The scheme was never meant to be a permanent alternative and it has become increasingly difficult to qualify.
The number of denials by HMRC is up by 93%; this is certainly revealing and shows HMRC feels as though the economic downturn is a thing of the past.
The goal is to wind down the scheme and eventually eliminate it as an option.
This brings the credit card suggestion full circle; HMRC knows its scheme is no longer any significant option, therefore, many businesses may only have their credit to rely on, even if they are paying 18% or more in interest, not to mention the additional fees associated with 1.
5% fee tacked on.
For a business with thousands of dollars owed in tax, this can add up quickly.
Then again, it could be a struggling business's only option if it intends to remain solvent.
That advice is to pay taxes with a credit card instead of deferring payments.
But just how wise is this and why would HMRC suggest it? HMRC charges 1.
25% for accepting a credit card; a fee it keeps.
But could that really be the reason it's been suggested? Most likely not, say some accountants.
Still, those same accountants admit they're at a loss as to why a business that is struggling to make its tax payments would go further into debt by using a credit card, with high interest rates, to pay a tax bill.
One tax partner at UHY Hacker Young, Roy Maugham, says, "Credit card payments are an expensive way to pay a tax bill.
If a business is struggling for cash flow, the last thing it needs is another credit card bill".
On the other hand, HMRC is defending its practices and says that while it's not changed its policies or criteria for extending time for companies that face temporary financial difficulties, it does continue to require that business to convince HMRC that it has not other means of raising money to make their tax payments.
One of those ways that must not exist is the ability to rely on a credit card, regardless of how much interest a business might have to pay the credit card company.
It defends the 1.
25% transaction fee by saying the law requires it.
Others says this is just another way HMRC drops the ball in its sensitivity efforts, especially in tough economic times.
One solution that's been suggested many times is a grace period.
Many say a six month grace period is all most businesses would need to get past temporary money problems.
Accountants across the UK agree and say a true temporary cash flow problem rarely, if ever, exists for more than a few months.
HMRC has long since warned businesses not to rely on the Time To Pay program designed to help businesses defer tax payments.
The scheme was never meant to be a permanent alternative and it has become increasingly difficult to qualify.
The number of denials by HMRC is up by 93%; this is certainly revealing and shows HMRC feels as though the economic downturn is a thing of the past.
The goal is to wind down the scheme and eventually eliminate it as an option.
This brings the credit card suggestion full circle; HMRC knows its scheme is no longer any significant option, therefore, many businesses may only have their credit to rely on, even if they are paying 18% or more in interest, not to mention the additional fees associated with 1.
5% fee tacked on.
For a business with thousands of dollars owed in tax, this can add up quickly.
Then again, it could be a struggling business's only option if it intends to remain solvent.