HMRC has a range of powers to recover unpaid tax from individuals and businesses. Ignoring the situation is not a solution, as interest on unpaid tax will accumulate, and late payment penalties may apply. For those struggling to pay their tax bill or anticipating difficulties with an upcoming payment, it is crucial to take prompt action.
Setting up a Time to Pay Arrangement
For those unable to settle their tax bill in one payment, a Time to Pay arrangement may offer the flexibility to pay in instalments. Depending on your individual circumstances, this arrangement can sometimes be set up online. If this option is not available, contacting HMRC directly to discuss alternatives is advised. Although interest will still accrue, setting up an instalment plan can help avoid late payment penalties. More information about Time to Pay arrangements is available on the Gov.uk website.
HMRC Visits
If a tax bill remains unpaid and no Time to Pay arrangement is in place, HMRC may attempt to contact the individual or business to explore repayment options. Should there be no response, an HMRC officer might visit the individual’s home or business premises to discuss the situation. During the visit, the officer will aim to agree on a payment plan, either for full settlement or instalments. For convenience, the officer can also process card payments during the visit.
Debt Collection Agencies
In some cases, HMRC may pass the debt to a debt collection agency. These agencies may reach out by letter, text, or phone but will not conduct visits. Payments can be made directly to the debt collector, and the possibility of setting up a Time to Pay arrangement may still be available to resolve the debt.
Adjusting the Tax Code
For individuals paying tax through the PAYE system, HMRC may recover the unpaid amount by adjusting the tax code. This method allows the outstanding debt to be collected over time directly through PAYE deductions.
Taking Possessions to Cover the Debt
If HMRC and a debt collection agency are unsuccessful in recovering the debt, HMRC may resort to seizing possessions to cover the owed amount. Before this action is taken, HMRC will issue a formal notice of enforcement, which includes a charge. The individual will have the opportunity to settle the debt before enforcement begins. An HMRC officer will visit to request payment; if the debt remains unpaid, possessions may be taken on the spot, or an agreement will be drawn up with a deadline for repayment.
If the debt is not paid by the deadline, the goods will be removed and sold to clear the outstanding tax. The costs associated with this process will be charged to the individual. If the sale of possessions raises less than the amount owed, the individual will still be liable for the remaining debt. Conversely, if the sale raises more than the amount owed, the excess will be returned. HMRC will not seize essential items necessary for basic security and wellbeing.
Court Proceedings
HMRC may also use court proceedings to recover unpaid tax. These methods can include:
- Charging orders
- Attachment of earnings orders
- Third party debt orders
- Recovery from pension payments
Insolvency
As a last resort, HMRC may apply to the courts to declare an individual or a company insolvent. This step is typically only taken when all other recovery options have been exhausted.
Get Support
It is clear that HMRC has multiple strategies for recovering unpaid tax. For anyone facing difficulties meeting their tax obligations, it is essential to act early and explore the available options, such as Time to Pay arrangements, to avoid more severe consequences. For tailored advice and support with managing tax obligations, professional assistance is recommended.
