Tackling Tax or HMRC Debt Problems
There are some people who fear that they might go to court, or worse still to prison if they cannot pay tax or other money owed to HMRC. In reality, the majority of cases can be settled by negotiation with HMRC, prison only ever applies to the most serious cases of fraud and tax evasion.
When it comes to money owed to HM Revenue and Customs (HMRC), the most crucial advice is not to ignore the bill - HMRC will eventually instigate legal proceedings against you for the debt.
If you owe tax, commonly the Debt Management and Banking division of HMRC would be dealing with your case. You may find they telephone you about the debt – try not to panic as this is quite routine practice.
What to Do When You Can’t Pay
First of all, check the figures on your bill are correct. You may find it useful here to contact the charity Tax Aid, who support the public in all matters related to HMRC. Their helpline number is 0845 120 3779. You’ll find a link to them on our Useful Organisations page.
Next, contact the tax office whose details appear on the last letter you have received. They can advise you about the bill amount and revise it if they agree it is incorrect. If the bill is correct but you simply can’t afford to pay it immediately, you can offer to make regular payments to tackle the bill.
If you are finding any aspect of the process difficult, contact one of our expert debt advisors for support. You may also want to contact Tax Aid for free advice.
Never Ignore the Problem
If you ignore your bill, or cannot come to an agreement for payment, HMRC can:
Issue an Order to Legally Take Possession of Goods (‘Distraint’): HMRC staff would visit your home to take an inventory of items which it could seize to repay the bill. In practice, this is a rarer procedure and strict rules apply to staff conduct and which goods that can be taken.
Start Magistrates' Court Proceedings: This can happen if you owe less than £2,000 for under 12 months; a summons will arrive to inform you of the hearing. This action can be halted by paying the debt. The court can order you to pay the debt plus costs, and should you not meet these, bailiff’s action can be taken. Unlike County Court Judgements, no record appears on your credit file.
Start County Court Proceedings: HMRC may seek a County Court Judgement (CCJ), should the bill remain unsettled because the above two recovery methods could not be applied. You can find out more about CCJs on the County Court Judgements page. Unfortunately, CCJs do appear on your credit file. Bankruptcy Proceedings: Should your debt remain unpaid, or the debt is much larger than the money you could feasibly raise to repay it by selling your assets, HMRC could petition for your bankruptcy. Bankruptcy is a highly regulated legal process – see our page on Bankruptcy for more details.
In every circumstance, if you are facing tax or other HMRC debt, we strongly recommend you call our expert debt advisers for free, confidential debt management advice.
You may also find it useful to contact Tax Aid’s helpline on 0845 120 3779 (10.00 am to 12.00 midday, Monday to Thursday at the time of writing), or your nearest Citizens Advice Bureau (you’ll find a link on our Useful Organisations page).
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