HMRC Tax Debt & Fines

Time to pay agreements

What HMRC will agree to accept on a time to pay arrangement will depend on the full facts of the business or individual. They will take into account how much the debt is and whether you have any realisable assets.

To set up a payment plan you’ll need:

• the relevant reference number for the tax you cannot pay, such as your unique tax reference number

• your bank account details

• details of any previous payments you’ve missed
  
  

You may be able to set up a payment plan online, depending on which type of tax you owe and how much you owe.

If you owe employers’ PAYE contributions

You can set up an employers’ PAYE payment plan online if you:

1. owe less than £15,000

2. are within 35 days of the payment deadline

3. plan to pay your debt off within the next 6 months

4. do not have any other payment plans or debts with HMRC

5. have submitted any employers’ PAYE submissions and Construction Industry Scheme (CIS) returns that are due

If you owe tax from Self Assessment

You can set up a Self Assessment payment plan online if you:

• have filed your latest tax return

• owe less than £30,000

• are within 60 days of the payment deadline

• plan to pay your debt off within the next 12 months

• do not have any other payment plans or debts with HMRC

If your company is in tax debt

HMRC will ask you to propose how you’ll pay your tax bill as quickly as you can. They will ask questions about your proposal to make sure it is realistic and affordable for you.

You must reduce your debt as much as possible before setting up a payment plan. You will be expected to do this by releasing assets like stock, vehicles and shares.

HMRC may ask company directors to:

1. put personal funds into the business

2. accept lending

3. extend credit
   
   

If you cannot set up a payment plan online

You’ll need to contact HMRC.

They will ask you:

1. if you can pay in full

2. how much you can repay each month

3. if there are other taxes you need to pay

4. how much money you earn

5. how much you usually spend each month

6. what savings or investments you have

7. If you have savings or assets, HMRC will expect you to use these to reduce your debt as much as possible.

If you’ve received independent debt advice, for example from Citizens Advice, you may have a ‘Standard Financial Statement’. HMRC will accept this as evidence of what you earn and spend each month.

HMRC Recovery Powers

Because HMRC are recovering money owed to the government,  they have extensive powers to recover debt and will always use them if a time to pay agreement is not reach. 

Here is a brief outline of the processes they can follow:

1. Home visit: HMRC can visit you at your home or business address to help them understand your circumstances so they can work with you to settle the tax you owe.
   
   

2. Debt collection Agency: A debt collection agency may be contracted to discuss settling the debt. The debt collection agency will not arrange any visits to you.
   
   

3. Directly from your bank account: HMRC can recover debts directly from your bank and building society accounts. This is called ‘direct recovery of debt’. You must owe more than 1k and have enough money in your account to repay the debt.
   
   

4. Taking control of goods agreement: HMRC can take certain possessions to sell and raise money to repay your tax debt. They will never take your possessions that are essential for your security and wellbeing. An HMRC officer will then visit you between 6am and 9pm if you live in England or Wales. They will ask you to pay your debt. If you do not pay, the officer will list your possessions which may be able to be sold to cover the debt and the costs to sell the items (for example, fees for auctioneers or advertising). They will either take the possessions from your premises immediately, or ask you to sign a Controlled Goods Agreement if you live in England and Wales.

The agreement will include a deadline for you to pay what you owe. You can continue to use the items but you cannot sell them or give them away while the agreement is in force.

If you do not follow the terms of the agreement or pay what you owe by the deadline HMRC can remove the possessions and sell them. They will write to you to give you notice before they do this.

Additional fees will be added to the debt when bailiffs are instructed.

• A formal Notice of Enforcement that of £75.

• A fee of £235 will be charged for HMRC taking control of your possessions, plus 7.5% of the proportion of the main debt over £1,500.

• For possessions HMRC remove and sell at auction there is a fee of £110, plus 7.5% of the proportion of the main debt over £1,500.
  
  

Although the possessions can only be listed by an HMRC officer, they can be collected by private auctioneers employed by HMRC.

Whoever is collecting the goods can use a locksmith to enter premises to remove the goods, if necessary. They do not need a warrant from the courts or to give any notice to you first.

5. Court processes: HMRC will consider a range of court processes, such as:
   
   

• Attachment of earnings order (recovery direct from your wages)

• Charging order (a charge on land, property, securities, stocks, shares, trusts, ISA's & personal equity plans)

• County Court Judgment (County Court claim to enforce the debt further)

• Third Party Debt Order (Your bank or building society is served with the third party order, the court forces the money to be paid to HMRC.
  
  

6. Insolvency: HMRC will, as a last result, consider liquidation or bankruptcy for outstanding tax. Your business will no longer be under your control.
   
   

7. Pension payments: HMRC will consider pension payments as income, including any lump sums you may receive when you retire. They will consider pension payments in their assessment of your ability to pay the tax you owe.

Reasonable excuses

You can appeal against some penalties if you have a reasonable excuse, for example for your return or payment being late.

A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet, for example:

• your partner or another close relative died shortly before the tax return or payment deadline

• you had an unexpected stay in hospital that prevented you from dealing with your tax affairs

• you had a serious or life-threatening illness

• your computer or software failed just before or while you were preparing your online return

• service issues with HM Revenue and Customs (HMRC) online services

• a fire, flood or theft prevented you from completing your tax return

• postal delays that you could not have predicted

• delays related to a disability or mental illness you have

• you were unaware of or misunderstood your legal obligation

• you relied on someone else to send your return, and they did not
  
  

You must send your return or payment as soon as possible after your reasonable excuse is resolved.

What doesn't count as a reasonable excuse

The following will not be accepted as a reasonable excuse:

• your cheque bounced or payment failed because you did not have enough money

• you found the HMRC online system too difficult to use

• you did not get a reminder from HMRC

• you made a mistake on your tax return

How to appeal

1. Late Payment Interest: HMRC issues fines and interest charges for late payments. You can see how these are set our on the GovUK website. To remove late payment interest, you would first need to appeal that you don't owe the tax that the interest is being charged on.

2. Appeal a Self-Assessment Late Filing Penalty: You can appeal late filing £100 penalty fine but only if it is in within 30 days of the penalty notice being sent. If you filed a partnership return late, you must use form SA371.
   
   

3. Appeal PAYE Late Payment Penalty: You can appeal online if you’re registered for HMRC’s PAYE for employers service. Once you’ve logged in, select ‘Appeal a penalty’. You’ll get an immediate acknowledgment when you submit your appeal.
   
   

4. Appeal a Late VAT or Corporation Tax return: You can also use these specific forms for:

• filing a late VAT return if you had a reasonable excuse

• Corporation Tax if you filed late because of computer problems
  
  

5. No appeal form: You can send a signed letter to HMRC instead. You must include a full explanation of why your return or payment was late, including dates.
   
   Also include in your letter:
   
   

• your name

• your reference number - for example your Self Assessment Unique Taxpayer Reference (UTR) or VAT registration number
  
  If you could not file or pay because of computer problems, you should include the following:
  
  

• the date you tried to file or pay online

• details of any system error message

6. Reviews: Reviews usually take 45 days, but HMRC will contact you if it will take longer. HMRC will write to tell you the result of its review.
   
   

7. Appeal to a Tax Tribunal (indirect tax): You can appeal to the First-tier Tribunal (Tax) if you want to challenge some decisions by HMRC. You will need to make a hardship application first if you cannot pay what is being requested.

 
Make a hardship application by writing to HMRC at

HMRC

Solicitors Office and Legal Services

Indirect Hardship Team (S1759)

BX9 1ZT

giving:

• details of the appeal, and

• the reasons why they believe payment would cause hardship, and

• the amount they are asking to be suspended.

For further information, visit the GovUK website.