Collection of tax debts post Covid-19

During the Covid-19 pandemic, HMRC paused much of their tax collection work, both to allow resources to be diverted to other activities, such as administering the various coronavirus support initiatives, such as the Coronavirus Job Retention Scheme and the Self-Employment Income Support Scheme, and to provide those whose finances were adversely affected by the pandemic with a bit of breathing space.

However, as the country starts to emerge from the pandemic HMRC has once again turned their focus to the collection of tax debts, publishing a policy paper setting out its approach.

Contact from HMRC

HMRC will generally contact taxpayers who have unpaid tax bills and who have not come to an agreement with HMRC regarding the payment of those bills. The contact may be by post, by phone or by text. Anyone who receives contact that purports to be from HMRC should check that the contact is genuine – HMRC has published guidance on the Gov.uk website containing tips to spot approaches that may be fraudulent.

Any contact from HMRC should not be ignored – HMRC will deal with taxpayers who work with them more favourably than those who resist attempts to get in touch. Those that do resist may be visited by an HMRC officer.

Ideally, taxpayers who are struggling to pay should contact HMRC to broker an agreement rather than waiting for HMRC to contact them.

Pay if you can

The briefing makes it clear that HMRC expect those taxpayers who are behind with their tax bills to pay the tax that they owe if they can.

Being able to pay may involve taking advantage of the financial support packages available and taking out a loan, such as one under the Recovery Loan Scheme, to provide the necessary funds to clear the tax debt.

If a taxpayer needs time to arrange a loan, HMRC may agree to defer the debt for a short period of time until the finance is agreed.

Set up a time-to-pay arrangement

If the taxpayer is unable to pay the outstanding tax in full, they may be able to agree a time-to-pay arrangement with HMRC allowing payment to be made in instalments.

If the client has already been approached by HMRC, they should contact the tax office that sent the communication to discuss setting up a time-to-pay arrangement. Otherwise, they can contact HMRC’s Payment Support Service (0300 200 3825). When making the call, the taxpayer should have their unique taxpayer reference and bank details to hand.

HMRC will want to know the amount of the bill that they are struggling to pay and why they are having problems paying it. They will also want to know what the client has done to try and get the money together. They will also take into account how much the client can pay immediately, and how long they may need to pay the outstanding balance.

Once a time-to-pay arrangement has been agreed, it is important that payments are made on time in accordance with the arrangement. Failure to do so may trigger enforcement action.

Enforcement action

If the taxpayer fails to communicate with HMRC or stick to the terms of an arrangement, from September 2021, HMRC may also take enforcement action to recover the debt. They have a range of powers available, including taking control of goods, summary warrants and court action (including insolvency proceedings).

While HMRC will endeavour to support viable businesses, if they judge that a business has little chance of recovery, they will act to seek to recover any tax that may be due.

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