Does HMRC Ever Write Off Debt?

Does HMRC ever write off debt? Yes, but only in limited and specific circumstances such as insolvency, hardship and when debts are time barred.

HMRC’s General Approach To Debt

HMRC is a powerful creditor, having a range of enforcement tools, including:

• Time to Pay Arrangements
• Wage and bank account garnishments
• Bailiff enforcement
• Court proceedings and insolvency petitions

Before considering any form of debt relief, HMRC will usually exhaust all avenues to recover the money owed. That includes contacting debtors, negotiating repayment terms, and using their legal powers to enforce payment.

Does HMRC Write Off Any Debt?

HMRC does not routinely write off debts. Usually, this will arise through necessity.

In the year 2023-2024, HMRC unpaid taxes written off were £5,049 million and £567 million in remissions.

HMRC revenue losses are made up of remissions and write-offs. Remissions are debts capable of recovery, but HMRC has decided not to pursue the liability on the grounds of value for money. Write-offs are debts that are considered to be irrecoverable because there is no practical means for pursuing the liability.

When HMRC Might Consider Writing Off Debt

Whilst a relatively rare event, there are therefore scenarios where debts can be reduced or cancelled:

Company Insolvency

When a company enters liquidation, administration, or another formal insolvency process, HMRC is treated as an unsecured creditor (albeit with secondary preferential status for certain taxes like VAT and PAYE). In these cases:

• HMRC may receive only a portion of what is owed, or nothing at all.
• The unpaid balance is then written off as part of the insolvency process.

This is not a goodwill gesture; it’s a legal outcome of insolvency proceedings.

Individual Bankruptcy

If an individual is made bankrupt and tax debts are included in the bankruptcy, HMRC is bound by the bankruptcy rules. The tax debts (excluding fraudulently incurred debts) will usually be written off at the end of the bankruptcy period.

Statute-Barred Debts

Tax debts are not easily extinguished by time limits, but in some cases, old tax debts may become unenforceable after a significant period, particularly if HMRC fails to take timely enforcement action.

Extraordinary Hardship (Extra-Statutory Concessions)

For individuals in severe financial hardship, typically the elderly, the terminally ill, or those in extreme poverty, HMRC may agree not to pursue the debt. This is done on a case-by-case basis and often under what is known as Extra-Statutory Concession A19.

What HMRC Will Not Do

HMRC will not write off debt because you disagree with the tax bill. You can expect HMRC to pursue the debt they are owed.

They will not cancel a debt just because the business is struggling, unless it enters insolvency.

They won’t write off a Bounce Back Loan or Coronavirus support scheme debt; they’ll pursue the company where fraud or misconduct is suspected.

Given HMRC’s general obligation to collect taxes, the answer to the question, can you write off HMRC tax debts is perhaps that it is unrealistic in most cases without formal insolvency proceedings.

What to Do if You Can’t Pay HMRC

If you’re facing tax debt and can’t pay, it’s crucial to act early. Options include:

• Negotiating a Time to Pay Arrangement
• Seeking advice from an insolvency practitioner
• Exploring whether a Company Voluntary Arrangement or Voluntary Liquidation is appropriate

As a result, feel free to get in touch for a free initial consultation about the options available to you to clear HMRC tax debts.