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If you can't pay your tax on time because of temporary financial difficulties, you may be able to make an instalment arrangement. However, if your financial difficulties are more serious we may need to consider other methods of payment or relief.
What "in financial difficulties" means
"In financial difficulties" isn't defined in tax laws, and is not an accepted legal or accounting concept. We use the term to mean a person's financial situation is such that debts cannot be paid on time. This means that either:
- creditors may seek liquidation (for a company) or bankruptcy (for an individual), or
- the debts of a business are a substantial limitation on carrying out normal income-producing activities.
In financial difficulties can take into account:
- contingent liabilities that will arise after a future event, or
- term liabilities that have yet to mature, for example, debentures payable two years from now.
However, these will be included only if they can be reliably estimated and must be paid when they occur.
Relief for businesses in financial difficulties
Legally we must make sure that any relief granted will maximise the net present value of tax paid. Generally this means that tax paid now has more value than tax that will be paid in future. Reducing the amount payable now may allow a business to survive and pay what it owes at a later date, rather than going into liquidation and not paying at all.
The relief available depends on your situation. We need to work this out with you after examining your financial situation and your ability to pay your tax.
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