If you can’t pay your HMRC tax bill, you should be prepared for them to take some increasingly severe measures to compel you to do so.
HMRC’s term for these actions is ‘enforcement’, and they have a special task force known as Enforcement and Insolvency unit for this side of their activities. However, there is an escalation process which may include Late Stage Debt Resolution or Debt Management and Banking (DMB).
Feeling pressure from any creditor can be stressful, but as the UK’s largest creditor HMRC have an efficient and extremely effective system in place to get their money.
The one thing you cannot do is put your head in the sand with HMRC, because they are not going to go away until you take action.
What Happens If You Owe Taxes and Can’t Pay?
If you have received HMRC threatening letters or other indications that enforcement may be imminent, we would strongly recommend you to contact one of our team for some confidential advice about your situation. We have a specialist HMRC team that can help in most cases.
Negotiating Time to Pay Your Tax Bill with HMRC
Time to Pay Arrangements are structured payment plans allowing for monthly repayments of your tax arrears.
UK Companies have a statutory right to request Time to Pay Arrangements (TTP) if they cannot pay their tax bills on time so it’s absolutely worth calling HMRC and discussing this if you’re behind.
They are more likely to agree if you’ve maintained clear communication with them until now, and are a ‘first offender.’ Read our full article on Time to Pay Agreements with HMRC
How Does HMRC Enforce Compliance if you Haven’t Paid?
Adjusting Your Earnings or Pension
One of the ways HMRC recoups their money is by simply adjusting your Self Assessment Tax code or Class 2 National Insurance accordingly.
For those that earn less than £30,000, they can take up to £3000 maximum, but these figures increase as your salary does. If they intend to take this course of action, you’ll be informed by letter before the end of the current tax year.
HMRC may Retain the Services of a Commercial Debt Collection Agency
HMRC currently uses the services of 13 large commercial debt collection agencies. These agencies may telephone you, send text messages, write letters or turn up at your premises.
If they do appear on your property, you should be informed that they have no legal right to enter your premises.
HMRC may use Baliffs to Seize your Possessions and Sell Them (Distraint)
HMRC’s powers of distraint allow them to visit your premises and inventory your company’s assets.
Depending on the situation, these are then either carried away on the spot by the officer or left with you under what’s called a Controlled Goods Agreement. This is where you acknowledge that HMRC is now the legal owner of these goods, but are allowed to keep them on your property until HMRC sells them. This is usually within seven days of their visit.
If the goods are sold for more than you owe, you’ll be sent the remainder. If they don’t cover the debt, you will still have to pay the difference.
HMRC can Now Take Money Directly From Your Bank Account
Recent powers allow HMRC to enforce what they are calling ‘direct recovery of debts’ which means they can simply take it from your bank account.
They are legally entitled to send you a letter informing you of their intention to do this, and they must also have had a face to face meeting with you also.
The final requirement is that you should be left with no less than £5,000 in your account once the money has been deducted.
HMRC May Take you to Court
If HMRC opts to take you to court, you could be liable for court fees, and HMRC’s costs, in addition to your current tax bill.
Magistrates Proceedings – are an option where you’ve owed money for less than a year, or where you have separate debts of £2,000 or less.
County Court – For larger amounts, your case would be heard in a County Court at which HMRC may ask the court to send in bailiffs, take money from your earnings, make your bankrupt, forcibly wind up your company, order someone who owes you money to pay your debt, or place a charge on your property.
Force you into Bankruptcy
If the tax is owed by an individual without the money or assets to pay HMRC what is owed, it is within their power to file a bankruptcy petition forcing bankruptcy.
This will allow the Official Receiver to take control of all of your personal assets including the family home.
HMRC has the Power to Wind up (Liquidate) Your Limited Company
When all else has failed, HMRC has the power to forcibly wind up your company. Be aware HMRC is unlike a privately owned company and does need to obtain a County Court Judgement (CCJ) or issue a statutory demand.
Are Your Struggling to Pay Your HMRC Tax Debt?
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If you find yourself in this situation, we would recommend you take professional advice as soon as possible. Call us now on 08000 746 757.