What is a tax debt
Money a taxpayer owes to HMRC for PAYE, VAT, Corporation tax, income tax, national insurance contributions or inheritance tax.
HMRC approach to collecting a tax debt
1. When a taxpayer has a tax debt
HMRC always try to contact taxpayers by phone, post or text message so that HMRC can talk about their situation and agree a way forward. HMRC urge individuals and businesses to respond to these communications as soon as possible because, unless HMRC can discuss their situation, HMRC cannot tell if they need support or are simply refusing to pay.
HMRC want to work with individuals and businesses to find a way for taxpayers to pay off their tax debt as quickly as possible, and in an affordable way for taxpayers. Everyone is different, so the support HMRC offer varies from taxpayer to taxpayer. For instance, HMRC can discuss affordable payment options, such as a payment plan (called Time to Pay. HMRC typically have more than half a million arrangements in place at any one time, and more than nine out of ten of taxpayers complete successfully).
2. If individuals and businesses cannot pay anything straight away
By getting in touch, HMRC can understand your circumstances better. HMRC may be able to offer a short-term deferral, which means nothing would need to be paid for a set period, and HMRC would take no further action to collect the tax debt until that time has lapsed.
3. Agreeing a Time to Pay arrangement
HMRC will also talk about other forms of support available a taxpayer may be eligible for. For example, exploring the range of government-backed lending support like Bounce Back loans and Coronavirus Business Interruption Loans, and agreeing repayment holidays or extending repayment terms.
Implications of refusing to pay or not getting in touch with HMRC
- Where individuals and businesses do not respond to any of HMRC communications, or refuse to pay when they can afford to, HMRC may try to visit taxpayers at their home or business address. Contacting individuals and businesses in this way helps HMRC understand their circumstances, including identifying if they are vulnerable or in need of extra support, and HMRC will always follow COVID-19 guidance.
- In the first instance, these visits will focus on making sure individuals and businesses are aware of their tax debt and the support available to taxpayers, as well as asking about their financial situation and ability to pay. HMRC will work with taxpayers to agree how best to settle the debt and, in many of these cases, HMRC are able to agree a payment or payment plan so no further action is needed.
- From September 2021, where individuals and businesses are unwilling to discuss a payment plan, or where a taxpayer ignores HMRC attempts to contact taxpayers, HMRC may start the process of collecting the debt using HMRC enforcement powers. These powers include taking control of goods, summary warrants and court action including insolvency proceedings, but HMRC only use taxpayers as a last resort and HMRC take great care to use taxpayers fairly and carefully.
- When choosing the appropriate action, HMRC will do all HMRC can to help individuals and businesses facing temporary financial setbacks. HMRC will only consider collecting tax through insolvency proceedings for example, where individuals and businesses have been found to be fraudulent, deliberately non-compliant, or where they are continuing to accrue debt with no prospect of being able to settle their existing debts.
Extra support for individuals and businesses
HMRC Debt Management teams are trained to identify and support individuals and businesses who might need extra help managing their financial affairs. HMRC work with organisations such as Mind and the Alzheimer's Society to help HMRC advisers identify and support individuals and businesses who have mental health issues or who are demonstrating emotional distress.
How we can help
Take the stress away from you by quantifying your tax debts, speaking to HMRC on your behalf and negotiate the best possible outcome.
For the complete policy paper visit https://www.gov.uk/government/publications/hmrc-issue-briefing-collecting-tax-debts-as-we-emerge-from-coronavirus-covid-19/collecting-tax-debts-as-we-emerge-from-coronavirus-covid-19