What Happens if you Don’t pay HMRC a Tax bill?


If you don’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).

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.

Here are the steps HMRC to enforce your tax compliance if you haven’t paid your bill.

Direct deduction from 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.

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.

Seizing your possessions and selling 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.

Court Action

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.

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.

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.

Read more about HMRC Tax Problems

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