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Debt Advice for Small Business Owners and Sole Traders

Here in the UK our economy is dependent upon small businesses across the land.  SMEs account for more than 99% of private enterprise and 60% of all private sector employment in Britain.  The combined annual turnover of SMEs was £1.9 trillion last year which was 51% of all private sector turnover.  The statistics clearly show just how important SMEs are to our country’s economic wellbeing:

  • 1.2 million businesses employ workers
  • 3.4 million businesses are sole traders (60% of the total)
  • 2.6 million businesses are VAT or PAYE registered.

However, small business owners often experience cash flow challenges that result in a struggle to survive as a business and often fall into debt.  Running a business whilst juggling household bills and personal debts can make it difficult to decide what to prioritise and pay first.

When it comes to business costs, some are more important than others as they can result in significant problems that interrupt your operations.

TYPE OF DEBT

CONSEQUENCE OF NON-PAYMENT

Mortgage or secured borrowing on business premises

Losing your business premises

Business rent arrears

Eviction or a visit from bailiffs

Business rates

A visit from bailiffs or imprisonment

Unpaid fines

A visit from bailiffs or imprisonment

VAT, National Insurance or tax

A visit from bailiffs, bankruptcy or imprisonment

County court judgements

A visit from bailiffs or a charging order

Equipment/machinery leases

Repossession of leased items

Utility bills – gas, electric, water, telecoms

Disconnection

 

If you’ve fallen behind with tax, VAT or National Insurance payments then you should contact HMRC immediately.  Check that you’re being asked to pay the correct amount and make sure that the information you’ve given about your business income and expenses is correct (otherwise your tax bill may be over-estimated).  Admit that you’re struggling to make the payments and offer to pay the debt at an amount that you can afford.  HMRC advisors will help you to work out a budget and set an amount that you can afford to pay towards tax.

If you don’t stick to the payment plan or at least begin to pay an amount you can afford immediately, HMRC may take action.  HMRC enforcement agents (the bailiffs) are able to remove stock and equipment from your business or goods from your home without a court order. These will be sold and the money used to clear your debts.   Whilst enforcement agents can enter your business premises without a court order, permission from a court must be obtained before they are allowed to enter your home.  In practice, enforcement agents rarely use force and if they are unable to obtain these goods from your or agree a payment arrangement with you, they are more likely to rely on another collection method like making you bankrupt. 

If you’re self-employed and need help with debts, Business Debtline is a free to use service where you can seek advice on your business finances and debt problems so that you can make an informed decision on the next steps to take in order to resolve your financial problems.