HMRC Tax Debts Guide

If you receive a bill from the HM Revenue & Customs and find it impossible to make payment on it, you should contact them immediately to make payment arrangements. If you fail to do this, the HMRC may proceed in recovering the money.

What happens if you ignore the bill?

The HMRC may institute one of several measures to recover the money you owe. If you fail to reach an agreement, or do not keep up with the payments you have agreed upon, they may impose one of the following:

Distraint

Your possessions can be taken and auctioned off to pay your bills plus any distraint costs. The collector should follow a fair process whereby the basic things you need to live, and the essential tools of your trade, will be exempt from seizure.

You will receive a visit from an HMRC representative at your home or business and he will require you to pay the arrears. If you are unable to pay this amount, you may face the possibility of having these goods removed from your premises. It may not happen immediately but is sure to happen within five days from that day and only paying the amount due, will prevent this from happening.

Refusing to sign the form may mean the immediate removal of your belongings. You will still have five days to pay the amount due. If your goods are sold at the auction and it fetches more than what you owe, you will receive the difference. Similarly, if it fetches less than what you owe, you will have to pay in the difference.

Magistrate’s court proceedings

The requirements for proceedings in a magistrate’s court are the following: arrears of less £2,000 or less for a period of less than a year.

The summons before the hearing will advise on what you owe as well as provide the exact details of the hearing. Paying the amount that is owed, will guarantee you won’t go to court. The magistrate should not be contacted for a dispute over the amount of money to be paid; the HMRC will be able to settle such disputes.

County court proceedings

If all the efforts to collect the debt fail, the HMRC can start with county court proceedings. This means you will receive a claim form and an information pack to explain your options. Legal action will be averted by paying the amount that is due. This can be in one lump sum or you can put in an offer to pay it by a certain date or in installments. However, the HMRC should receive this offer within fourteen days for it to be in effect. Any disagreements with the amount of money that you owe, should be directed to the HMRC. The court will issue you with a form on which you can state why you disagree with their calculations. You may also have to go to court to state why you are in disagreement.

Not responding to their claim or not paying what is due may result in having to pay the bill and any court fees incurred. Your details will be put on the Register of Judgments, Orders and Fines. This will affect your finances greatly as you will have difficulty in opening a bank account or borrow money. However, if you manage to pay the amount within one month of the judgment, you can have the entry removed.

Bankruptcy proceedings

You will face bankruptcy proceedings if you are unable to pay your debts, or if it exceeds your assets. This means you could lose everything: home, business, savings, and investments.

You will receive a statutory demand for payment. If you have not paid or made agreements to settle the amount within 21 days, you will receive a bankruptcy petition that will be served at your home.

Consider appointing a solicitor to help you with this matter. A solicitor may be able to have the hearing suspended until you can agree on the settlement details.

Should you be unable to pay, the bank will make a bankruptcy order and appoint a trustee to sell your goods towards bankruptcy costs and your debts.

Where to complain about unfair treatment

Even if you are unable to pay your tax, you are entitled to fair treatment from HMRC representatives. If you are unhappy with how you are treated, you may complain.

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