If you owe money to HM Revenue and Customs (HMRC), it’s important to take action to repay and manage the debt as soon as possible. HMRC debt can be a serious issue in the UK, and failing to deal with it can lead to legal action, additional fees, and damage to your credit score.
What is HMRC debt?
HMRC debt refers to money owed to HM Revenue and Customs (HMRC) in the UK, typically as a result of unpaid taxes. This can include income tax, national insurance contributions, VAT, and other taxes.
HMRC debt can also include penalties and interest charges for late or non-payment of taxes. If you owe money to HMRC, it’s important to take action to repay the debt as soon as possible to avoid legal action, additional fees, and damage to your credit score.
There are several options available for managing and repaying HMRC debt and tax payment. Seeking professional support can be helpful in navigating this process.
Ways to get on top of HMRC debts and tax debts
If you’re struggling with HMRC debt or tax debts in the UK, there are several steps you can take to get on top of the situation:
Double-check your tax bill or self-assessment tax bill
Make sure you’ve paid the correct amount of tax and that there are no errors or discrepancies on your tax bill or self-assessment tax bill.
Double-checking your tax bill or self-assessment tax bill is an important step to take if you want to avoid HMRC debt or tax debts in the UK. It’s important to ensure that you have paid the correct amount of tax and that there are no errors or discrepancies on your tax bill.
This can help you avoid overpaying or underpaying tax, and ensure that you don’t receive a penalty for incorrect or late payment.
Contact HMRC over tax debt
If you do owe money to HMRC, it’s important to contact them as soon as possible to discuss your options. HMRC is often willing to negotiate pay arrangements based on your monthly disposable income or individual financial circumstances.
Set up a ‘time to pay’ arrangement
If you’re struggling to pay your HMRC debt or tax debts in the UK, it’s possible to set up a ‘time to pay’ arrangement with HMRC. This arrangement allows you to spread the payments over a period of time that’s affordable for you, rather than paying the full amount owed in one go.
This can be helpful if you’re facing financial difficulties or unexpected expenses and need some flexibility in repaying the debt.
To set up a ‘time to pay’ arrangement, you’ll need to contact HMRC and explain your situation. HMRC will ask you to provide information about your income and expenses to help determine how much you can afford to pay each month. Based on this information, HMRC will work with you to set up a payment plan that’s manageable for you.
In some cases, HMRC may allow you to set up a payment plan online, quickly and easily. This can be a convenient option if you prefer to manage your finances digitally.
Stick to your payment plan
It’s important to stick to the payment plan agreed with HMRC and make all payments in line with the payment deadline. Missing a payment could result in additional fees and damage to your credit score.
By taking these steps and seeking professional support if needed, you can get on top of HMRC debt and tax debts in the UK and avoid legal action and other consequences.
What action can HMRC take if I don’t pay my income tax arrears?
If you don’t pay your income tax arrears, HMRC can take a number of actions against you in order to recover the debt. Below are some of the options available to them.
Send bailiffs or debt collection agencies to your home
If you owe money to HMRC and haven’t made arrangements to repay it, they may pass the debt to a debt collection agency or bailiffs to recover the money. This can involve visits to your home or workplace, which can be stressful and embarrassing.
It’s important to note that debt collection agencies and bailiffs have limited powers, and you have legal rights when dealing with them.
Apply for a County Court Judgment (CCJ)
If HMRC applies for a CCJ against you and the court agrees, it will set out how much you owe and the deadline for payment.
A CCJ can damage your credit score, making it harder to get credit in the future. It can also give HMRC additional powers to recover the debt, such as instructing bailiffs to seize goods or apply for an additional court order to deduct money from your wages.
Recover debts by deducting money from your wages
HMRC can use a “Direct Earnings Attachment” to deduct money from your wages to recover the debt. This involves contacting your employer to arrange for a fixed amount to be deducted from your pay each month until the debt is paid off.
This can be embarrassing and may affect your ability to pay for essential living expenses.
Begin bankruptcy proceedings against you
In extreme cases, HMRC may begin bankruptcy proceedings against you if you owe a significant amount of money and they are unable to recover it through other means.
This can have serious consequences, including the potential loss of assets and damage to your credit score. So you should seek professional advice if you’re at risk of bankruptcy due to HMRC debt.
It’s important to take action to deal with HMRC debt and income tax arrears as soon as possible to avoid these consequences. Seeking professional support can be helpful in understanding your options and negotiating a payment plan with 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 you 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.
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.
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 assets.
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 the business finances or assets to make this worthwhile).
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 typical HMRC debt collection process 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 cases, HMRC can chase you abroad if you owe money to them in the UK. The UK has agreements with many other governments to collect any debt owed in the UK.
These agreements are known as mutual legal assistance treaties (MLATs) and allow HMRC to work with foreign governments to collect debts owed by UK residents who have left the country.
In addition, HMRC can also use debt collection agencies and other methods to recover debts from overseas.
It’s important to note that the rules for debt collection vary between countries, so it’s essential to seek professional advice if you’re facing HMRC debt and are living abroad.