What happens if someone is unable to pay their income tax?

I have a friend who will be unable to pay their income tax for 2008 return.

Could anyone tell me what happens ? I know penalties will get added on. But will a sheriff be sent ? Or will their business be closed down?

This person does intend to pay, they are in the processing of liquidating assets.

Is your friend submitting his/her return for 2008 in October 2009 and keeping all the records together with the books well organised?

If she doesnt pay his/her tax due, interests will be keep accruing on top of the tax due at a 10% montly rate.

It may make sense to approach revenue directly and/or ask for a bank loan to pay off revenue

Regards,
jose

Their best bet, having spoken to their accountant would be to talk to Revenue and arrange for installments if at all possible.
Ignoring it will lead to interest and penalties, it would be a while before the Sheriff would be called in, and Revenue would tend to refer those cases to the Sheriff where there has been no engagement by the taxpayer with them first.

Following Derek suggestion. Your friend would need to explain clearly to Revenue the reasons why they cannot meet revenues payments.


Your friends accountant would have to provide Revenue with different information eg Bank statements, Aged debtor and creditor profile and an outline of how the proposed repayments schedule will work based on the liquidation of assets

Thanks that's very helpful, I will pass the advice on. She has already been refused bank loans but as I said is trying to sell off some assets, proving difficult in current climate.

it would be a while before the Sheriff would be called in,

Click to expand...

That's a relief anyway.

Presumably she has a chunk of preliminary paid since Oct-08.

Yes indeed, however she still has a large liability.

The key thing is to submit the return. That eliminates the possibility of a 5% (or even 10%) late filing surcharge. Your friend should then discharge the liability as soon as they can. Interest should accrue at a rate of approximately 10% per annum (not per month as an earlier poster suggested). I would suggest NOT bringing the matter to Revenue's attention until they first contact your friend. At that stage if the liability has not been discharged an installment arrangment should be possible. The key thing is not to bury one's head in the sand and by submitting the return and making part payments as regularly as possible your friend won't be doing that. I have seen cases where Revenue have not imposed interest where payment has been (say) 3 months late.

Thanks Rambo, that's good advice. I thought 10% per month seemed excessive, thanks for clearing that up!!