Overview Of What To Do About HMRC Debts
The first thing to do about HMRC debts is to take a deep breath and first and foremost, do not panic. Thousands of people have concerns about HMRC debts, you are not alone.
The next thing to do is to find out how much you owe HMRC. In order to deal with paying HMRC tax debts, you need to know what the debt is caused by and how it is broken down. In addition to the tax itself that might be due, there may also be interest and tax penalties that you need to be aware of.
What Happens If You Owe HMRC?
If you owe money to HMRC it will require you to make payment of the tax that is due and owing. If that debt is not paid on the due date then the matter will typically be handed over to HMRC debt management team who will start to send you letters to inform the taxpayer that they have a debt to HMRC that has gone unpaid.
Over a period of time, the matter will escalate as HMRC attempt to encourage payment of the debt by sending you HMRC chasing letters. If their chasing letters do not cause payment to be made then they may instruct HMRC tax debt collectors to take matters further.
Difficulty Paying HMRC
If you have difficulty paying HMRC then it is possible to work with HMRC.
Company Pay HMRC In Installments
When you have difficulty paying HMRC debts because you have a company cash flow problem after receiving a large bill to HMRC that you cannot pay all in one go, you may be able to agree to repay the debt by way of installments.
Time To Pay Arrangement
One of the common ways to repay the tax debt to HMRC is in installments. HMRC has a specific plan for such an event which is known as a Time To Pay Arrangement.
What Is A Time To Pay Arrangement?
You may be able to enter into a Time To Pay Arrangement in which the HMRC tax debt is no longer immediately payable and you arrange to repay HMRC over a period of time. This may start as a verbal arrangement but then it may need to be put in writing so that HMRC feels comfortable that it will be stuck to in paying HMRC.
What Happens If You Can’t Afford To Pay HMRC?
If you can’t afford to pay HMRC they will still pursue the tax debt. It does not mean that they will be paid because the expression ‘you cannot get blood out of a stone’ holds true.
However, even if you can’t afford to pay, that does not mean that HMRC debts will be written off. Even if you can’t afford to pay you can expect HMRC to pursue the debt for a considerable period of time.
How Long Can HMRC Chase A Debt?
HMRC can chase a tax debt for any period of time in light of Section 37 of the Limitation Act 1980. There is no limitation period on tax debts.
However, this does not apply to National Insurance Contributions (“NICs”) which are not deemed to be tax but ‘contributions’. As a result, HMRC can chase NICs for up to six years and should initiate legal action within that period of time if they want to pursue matters.
HMRC Debt How Far Back?
HMRC can in cases of fraud look back over a taxpayer’s tax affairs for a period of up to 20 years.
More commonly HMRC will be restricted by less extensive periods typically limited to reviewing matters going back 6 years if a taxpayer’s conduct was ‘careless’ and HMRC discovers a loss of tax.
How Do I Get My HMRC Debt Written Off?
The answer is generally you do not get your HMRC debt written off.
However, if you can’t afford to pay HMRC then they will write the debt off if you go into insolvency such as Bankruptcy, IVA, or in the case of a company Liquidation. In such a case HMRC will file a Proof of Debt with the relevant Insolvency Practitioner and the matter will be left with them to deal with.
Oliver Elliot Comment: What To Do About HMRC Debts
If you want to explore your options over HMRC tax debts and what to do then get in touch and contact us. We Know Insolvency Inside Out.