Many entrepreneurs are currently struggling with a business that has - unexpectedly - fallen into financial difficulty. For reasons that will vary per company, (tax) debts have arisen. From creditors, this may increase the pressure on the company to meet its payment obligations. Despite the debts, how can you continue with the business that is, at its core, viable? This blog will answer that question.
Tens of thousands of entrepreneurs received a letter from the Tax Administration informing them that the coronabet payment scheme has been withdrawn due to (further) arrears in payment obligations and announcing that it will start taking (coercive) collection measures from September 2023. Meanwhile, the Inland Revenue has started collecting tax debts from entrepreneurs, because: 'procrastination does not cancel'.
Entrepreneurs often assume that it is impossible to come to an arrangement with the tax authorities. Nothing could be further from the truth.
As a result of the corona pandemic, a temporary relaxation on the 2008 Recovery Guidelines has been introduced. We wrote about this earlier in the blog 'Temporary relaxation of (tax) recovery options for entrepreneurs'. In short, this relaxation offers companies the opportunity to restructure tax debts. For the time being, the Tax Administration is sympathetic to restructuring requests. Also, as a result of the temporary relaxation of the 2008 Recovery Guidelines, the Tax Administration will, under certain conditions, accept an equal percentage (partial payment on the outstanding debt) as to regular (trade) creditors. Consent to a reorganisation request thus becomes more attractive to the other (trade) creditors. After all, a larger amount is available to the (trade) creditors because the Tax Administration - unlike normally - will settle for less. This increases the success rate of a reorganisation request with creditors, including the Tax Administration. However, such a request requires thorough preparation, coordination and consultation with, among others, Tax Authorities and other creditors. The applicable policies are very specific. At the same time, reorganisation requests require a lot of interpretation, explanation and substantiation by or on behalf of the entrepreneur.
The temporary relaxation with regard to tax restructuring options initially ran until 1 October 2023.
Tax bailiffs who visited entrepreneurs recently found that a large proportion of entrepreneurs have not yet sought help in repaying and/or remediating incurred debts. The Tax Authorities once again urge entrepreneurs to do so. To give entrepreneurs more and longer opportunities to do so, it has been decided to extend the temporary relaxation from 1 October 2023 to 1 April 2024. If, as an entrepreneur, you are faced with (tax) debts, this temporary regime offers ample(er) opportunities. For this reason, it is also a good idea to take action right now and seek advice and guidance on exploring the options.
The company in financial difficulties rarely has debts only with the tax authorities. Precisely, arrears have also arisen with suppliers and landlords, for example.
Often, we see that various and/or multiple factors have played a role in the resulting debt. Besides the corona pandemic, you can think of: high rent charges, supply (anciers) problems, a legal dispute, loss of a sales market, etc. Causes any business can run into.
In the context of a tax remission application, one of the conditions set by the Inland Revenue is that, in principle, all creditors are included in the remission. This means that the other creditors must also agree to (partial) remission of their claims. There are a number of exceptions to this listed in the 2008 Collection Guidelines and additional exceptions are allowed under circumstances.
If you cannot reach a private agreement with the Tax Authorities and/or your other creditors, there is still a possibility to reach an agreement through the courts.
The Homologation Private Arrangement Act ("WHOA") offers the company the possibility of rehabilitation and could then be a solution for the company. This is because the WHOA not only allows restructuring of (tax) debts, but also (subject to conditions), for example, agreements can be amended or terminated, a cooling-off period can be ordered with regard to creditors and creditors can be forced to agree to the offered arrangement under circumstances. Being forced to agree to a company's reorganisation request was possible before the WHOA only under very special circumstances.
The WHOA is a relatively new and complex law that gives companies that are viable at the core a real chance to recover after restructuring. On top of that, the temporary relaxation on the 2008 Recovery Guidelines now offers companies good opportunities to achieve tax recovery.
Meanwhile, we have guided several (tax) reorganisation processes and WHOA processes for entrepreneurs that led to an actual reorganisation. As a result, we also have short lines of communication with handlers within the various bodies such as the Tax Office, the UWV, RVO and banks. We also have knowledge of and experience with (implementation of) applicable policies. Thanks to our guidance, several companies are already future-proof again.
We work in a multidisciplinary team that is very well attuned to each other and can provide support in, among other things, obtaining insight, improving business processes, drawing up a turnaround plan, communicating with stakeholders, drawing up a settlement proposal, obtaining financing and, of course, legal assistance throughout the entire process.
We understand if you can no longer see the forest for the trees. Are you curious about which method of restructuring is right for your company? Then contact one of our lawyers from the Insolvency & Restructuring team.