HMRC Debt & Arrears Advice

Are your dealing with HMRC debt and wondering what will happen if you fail to pay this? This article explains how to repay and manage debt relating to the HMRC.


Can HMRC take my house?


HMRC does not have the ability to force someone else to pay your debt but they can use different methods of pursuit for recovering money owed and you have choices about how best to manage the debt you have outstanding.

If a bankruptcy order is made the Official Receiver (OR) will look at assets you own, by title or beneficial interest, and will seek to realise money from your share. In the case that you do not have any interest in the property then the OR does not have any interest in the property. If you do have an interest in the property then it may be that the property may need to be sold to get the value of your share.

To avoid further action from HMRC, it is important to communicate your change of circumstances as soon as possible and they may be able to come to a new arrangement to pay when you have increased your income again.


Can HMRC force to sell a shared property?


Ultimately the owners of a jointly owned property can have it sold to pay a debt owed to any creditor for the debts of one of the owners. So providing the correct procedures are used by HMRC, they could force you both to sell your home. However, how this is done will depend on the procedure that is used.

Two procedures are available. The first is to place a charge on the property and ultimately apply for a warrant of sale (this procedure is not available in Scotland); the other procedure is to make the debtor bankrupt.

If HMRC makes you bankrupt then essentially all your property belongs to the trustee in bankruptcy who may apply to sell the home to pay the debts owed and also their fees.

The other party does have rights and they are entitled to their share of any equity from the home. But ultimately, unless the home has very little or no equity, it is likely the home will eventually be sold. Even if it doesn’t have much equity, they may wait till it does.


What powers do the HMRC bailiffs have?


HMRC bailiffs or enforcement officers are allowed to visit your business premises if you fail to pay any debts owed to the HMRC. They have the power to take company belongings and sell them to pay off your debts. HMRC bailiffs may collect debts from:

They can only take luxury items which belong to the company. This means any work equipment which is a total value of £1,350 or less cannot be taken. If the debts belong to a limited company, then personal assets cannot be taken. For more information, please see our article on paying off business debts.

Please note HMRC bailiffs cannot take items which have been rented or leased. Of course, if you are a sole trader, then your personal belongings are at risk by the bailiffs. For more information, please see our section on bailiffs.


Can I go bankrupt if I owe HMRC?


There are a number of consequences if you fail to make repayments to the HMRC. The HMRC could do the following:

  • Take money out from your bank directly
  • Remove your assets and sell them using a bailiff
  • Take you to court
  • Make you go bankrupt


Can HMRC chase a dissolved company?


If your company is liquidated or dissolved, this means the payment of any outstanding debts will come from the sale of the company’s asset. It is important to remember that the debt of a company belongs to the company. If the sale of company assets does not cover the outstanding debt, then the remaining debt will be deemed uncollectable.  

If the debt owed was a significant amount in rare cases the company may be restored to the register of companies to allow HMRC to continue collecting the debt. However this is a long and costly process, so it is very unlikely HMRC will do this (unless they had proof that your company had a high level of assets before being dissolved).

Please note, when you dissolve a company, Companies House will notify HMRC of this action. Since HMRC are the creditors, they will in most cases object to any applications to dissolve a company in debt.


How long can HMRC chase a debt?


There is normally no limit to how long HMRC will chase a debt for, but action should be taken within 6 years. If you live in Scotland, there may be a 20-year limit.

The normal process of how HMRC chase debt, may include you receiving a letter from the HMRC regarding your debts. You will need to respond to this in under 30 days. If you can not make the repayment in 30 days, you will still need to contact the HMRC to negotiate a payment plan with them. This payment plan can be spread from anywhere between 12 months to 10 years depending on the size of your debt. In rare cases, you may even be able to put your payment on hold for 12 months.

Please note, HMRC can write some debts (i.e tax credit) off if you can not pay them with good reason.


Can HMRC chase me abroad?


Yes in most countries. The UK has an agreement with many other governments to collect any debt owed in the UK.

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