I cannot afford to pay my HMRC tax bill – what should I do?

Many are worrying that “they can’t pay their HMRC tax bill” and want to know what solutions there are to repay their HMRC debts?

Have you been financially affected by Covid-19?

You aren’t alone, many individuals and companies across the UK has fallen into debts due to unexpected economic circumstances

Do you need business re-finance help or company closure advice?

Read our article to learn about what options you have that can help you pay back your outstanding HMRC bills!

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If you struggling to pay your HMRC tax bill we can assist with all solutions available.

HMRC Business Debts

Owning your own business comes with a lot of benefits. You can manage your own time, build your dream business from scratch and help people whilst potentially making more money than you would if you were working for someone else.

On the other hand, there are a few extra considerations that much be addressed such as ensuring that business tax bills are all paid correctly.

For many business owners, January and April can be stressful months of working because most business bills are due then.

It is relatively common for business owners to realise that they have a tax bill due for collection, yet do not have enough money budgeted to pay for it.

As mentioned, this is not uncommon and is encountered by many yet the most important thing to do is take action as soon as possible.

Contact a self-assessment payment helpline or payment support service if you are worried about your tax return is incorrect.

If you have received a tax bill that you cannot pay it is important to contact HMRC immediately so you can come to an arrangement for payment. Whatever the case, do not delay in notifying HMRC and seeking help.

There is a range of payment plan options available to help out business owners if they find themselves in this position, whatever their personal or financial situation, some of which are discussed later in this article.

How Can I Avoid HMCR Tax Debts?

These types of debts are known as high priority debts and HMRC will pass these debts onto private debt collection agencies for them to deal with.

There are a few simple ways to avoid accumulating these debts and reaching this point in the first place such as:

  • Checking that you are paying the correct tax bill to HMRC – ensure that they have your most up to date information including any that relate to your business and expenses.
  • Check your self-assessment tax bill with time to spare – if your self-assessment tax bill is incorrect, this could result in unpaid tax debts. It is crucial that you pay your tax bill correctly, so it may be worthwhile hiring a qualified accountant to help with your books.
  • Create a budget – Figure out how much you are earning and create yourself a personal budget that covers all personal costs. Doing this will allow you to work out how much you can pay towards your income tax arrears.
  • Agree on a repayment scheme with HMRC and keep in contact with them regularly. Remember to update them on any changes in your personal or financial information.
  • Ensure you make repayments to any outstanding tax bills.

However, with many things that need to be considered, it is often quite easy to slip into a position whereby your HMRC debts are increasing at an alarming rate.

The consequences of not regaining control and paying off these tax bill debts can be quite serious, including court action, bailiffs and, at worst, imprisonment.

It is understandable that finding yourself in this position can be worrying but there are options to help you gain back control of these arrears, such as changing your pay arrangement.

If you feel like you have under or overpaid on your tax return, contact HMC straight away to amend the issue.

Can I Get HMRC Debts Written Off?

HM Revenue and Customs (HMRC) debts are ones that fall into debts relating to Income Tax, National Insurance or VAT arrears.

It is important to remain on top of these bills and pay them as soon as possible, otherwise, you could find yourself in a bit of a difficult situation.

You might end up wondering how to get HMRC debts written off.

Unfortunately, if your business is still trading whilst in financial trouble, it is unlikely that you can have HMRC debts written off. They will only write off debts where they are certain they cannot recover the money owed.

If for any reason, your business becomes insolvent, then the tax debt has a better chance of being written off, but your chances of setting up another business have diminished.

Insolvency practitioners can help you decide if this is the best route for you to negotiate your way out of debt. It is likely that an agreement can be made to spread those payments over a longer time period whilst the business continues trading.

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What Happens if You Don’t Pay HMRC Debt?

If you choose to ignore the debts that you cannot pay and they are accumulating and do not contact HMRC to discuss payment arrangements, then HMRC will begin its own proceedings to recover the money owed.

In worst-case scenarios, the enforcement action they choose could end the activity of your business and close it permanently.

You pay tax under Self Assessment

Initially, HMRC may add interest charges and late payment penalties to any bills that have not been paid; this is a clear warning that action is being taken.

If you still cannot pay back the money, or HM Revenue and Customs have been unable to agree on a payment plan, then it is very likely that you’ll be faced with an enforcement notice for the tax owed.

A Notice of Enforcement originally titled a Distraint Order Notice, can be given to businesses from HMRC without the need for HMRC to go through court procedures to obtain one.

After the notice is been issued, you have a choice of paying the debt in full or negotiating a Time to Pay arrangement.

A Time to Pay arrangement does not reduce the amount you owe, but it does give you that extra time to pay it back in full and can be the best option for many businesses.

If all fails and your debts still remain unpaid, Enforcement Officers will approach your business premises to take control of goods, whereby your goods will be removed from your possession and sold at a public auction.

Take note that HMRC Enforcement Officers have the right to remove enough goods to cover the cost of the tax debts, as well as the cost of the enforcement procedures that have taken place.

You are employed or receive a pension

If you pay your PAYE as an employee or because you receive a pension, there are still times when you can owe more tax.

For example, you could have more than one job or source of income that warrants further tax deductions.

So, while you are paying some of your outstanding tax bills, you might not be paying it all.

Always contact HMRC if you have any confusion surrounding your tax payments, as they can provide you with accurate information and explain why you owe the amount you do.

How can I file a complaint about HMRC?

If you feel like a matter concerning HMRC has not been handled efficiently or fairly, then you can make a formal complaint.

Contact HMRC

You can complain directly to HMRC via telephone, email or letter.

You can find the relevant department and contact details on the Government’s website.

Their opening hours are typically 8 AM to 6 PM, Monday to Friday. They are closed on the weekends and any bank holidays.

Make sure to contact HMRC during their opening hours to ensure your complaint is acknowledged in a timely manner.

If you choose to write a letter, make sure to make it very clear that you are filing a complaint. You can do this by writing ‘complaint’ on the envelope and at the top of the enclosed letter.

To make sure your complaint is handled quickly, always have your National Insurance number, Unique Taxpayer Reference for Self Assessment, your address and the reference number at hand, or included in your email / letter.

You should expect a response from any enquiry within 4 weeks’ time. If you have not received a response after 4 weeks, you can escalate your complaint to the Adjudicator.

Contact the Parliamentary and Health Service Ombudsman

If you are still not satisfied with how your complaint has been dealt with, you can request to escalate your complaint to the PHSO.

The Parliamentary and Health Service Ombudsman looks into cases where any government department has incited any discrimination, injustice or malpractice.

You need to speak to your MP, who will be able to contact the Ombudsman on your behalf.

You can find your local MP using the government’s website.

If the ombudsman finds that your complaint is valid and you have been treated unfairly, then you may be entitled to some form of compensation.

Tax Debt Advice

As mentioned earlier in the article, there are many steps that can be taken to avoid reaching the point of a Notice of Enforcement.

Taking that first step early on and notifying HMRC about your personal and financial situation, and the fact you are currently not in the position not be able to pay back the debt is the most important move.

By being transparent and honest about your money struggles, HMRC may agree to settle on an instalment payment plan, whereby you can pay back your outstanding tax over a 6 to 12-month time frame.

After ensuring this is done, there are plenty of organisations that have been built to help you and provide you and your business with the best advice tailored to your individual circumstances.

Debt Advisors could recommend a variety of routes that will get you back on top of your debt and set you in a good position to manage future bills.

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Online Time to Pay service for Self Assessment bills

If you have failed to pay your self-assessment tax bill on time, you can use HMRC’s automated online service.

You can set up a time to pay arrangement to clear the amount owed. However, there are some restrictions as to who can use this service.

You can only use the automated online service if the following apply:

  • The amount owed to HMRC is less than £30,000.
  • Your debt can be paid within 12 months.
  • Your tax return account is up to date.
  • The payment deadline was less than 2 months ago.
  • You don’t hold any other tax debts.
  • You are not on any payment plans currently.

If this is a viable option for you, then you can pay off any outstanding HMRC debts within 12 months.

You can also pay a lump sum to settle the account if your finances improve.

Individual Voluntary Arrangement

Individual Voluntary Arrangements (IVAs) could be a suitable solution but has to be agreed on by at least 75% of your creditors.

HMRC has the option to vote against an IVA proposal if it has outstanding returns.

An IVA is an agreement in which you pay a monthly instalment to an insolvency practitioner. The IP then directs your funds to the relevant creditors.

You can find the best IVA companies around on our researched list.

Contact a debt help charity

Business Debtline, Citizens Advice and TaxAid are all organisations that can help provide more information about the debt solutions available to you and should be contacted at the earliest possible point.

Check out our list of the most popular debt help charities around.

Struggling With Other Debts

Here are some other debt guides if you are struggling with different types of debts: