I owe money to the HM Revenue and Customs but can’t pay. What can I do?
If you are complete tax self-assessment forms as you are self-employed in some capacity, it is likely you will be expected to pay income tax twice a year in lump sums.
However, if you find you are unable to pay your taxes to HMRC then there are some courses of action:
- Payment arrangement – You many be able to arrange a payment arrangement with HMRC where you pay off your owed debt over an agreed period of time beyond the initial demand date. However, it is likely the money owed will increase due to increase while the whole debt is outstanding.
- Suspension – if you are unable to pay the debt immediately and a payment plan would not work for you, you may be able to arrange a suspension of collection action period that would give you time to find the owed money, perhaps through a private loan or selling an asset.
- Waiver – Occasionally HMRC will offer debtors waivers in particular circumstances, for example if someone is sick or suffering long-term unemployment. Please be aware the tax is not written off but you will not receive any further demands until your situation improves.
The contact details for HMRC can be found here.
What happens if I don’t contact HMRC and don’t pay my bill?
If you do not pay your tax bill and do not speak to HMRC about arranging a payment solution, the following may occur:
A member of staff from HMRC will visit your home or business. First, they will ask you to pay your bill.
If you do not, they will list your possessions and a form which they will then ask you to sign. If you sign the form you should have five days to pay your bill and they will not take anything away.
If you do not sign the form, you will still have five days to pay but the HMRC representative may take your possessions to cover the cost of the debt.
Once sold, if the recovered amount is more than your debt that money will be returned to you. If the items raise less money than the recovered debt then you will be expected to make the difference.
Magistrates’ court proceedings
If you owe £2,000 or less and you have owed the debt for more than a year HMRC may start proceedings against you in magistrates’ court.
If HMRC decide to go down this route you will receive a summons informing you of what you owe and where the hearing will take place.
If the magistrates’ court decides in HMRC’s favour, you will be expected to pay the debt plus court costs.
The court may also use bailiffs to recover the debt.
County Court proceedings
If HMRC are unable to recover the debt via distraint or through the magistrates’ court they may start County Court proceedings.
If HMRC go to County Court, you will receive a claim form and an information pack on what your options are at this stage.
Normally, you will be requested to pay your debt. If you cannot pay straight away and make an offer to pay by a certain date or pay in instalments the proceedings will stop.
If you disagree with the owed amount you can explain this on a form you will receive from the court. You may need to go to court to explain your reasoning.
If you do not reply to the court you will be ordered to pay the bill plus court fees.
Furthermore, your details will be placed o the Register of Judgements, Orders and Fine which would mean you may find it difficult borrowing money or opening a bank account.
However, if you pay within one month of the judgement being made you can ask to have the entry removed.
If you do not pay what you owe to HMRC, they may being bankruptcy proceedings against you.
If HMRC start bankruptcy proceedings you will receive a statutory demand which will be served to you personally.
If you do not pay the amount owed or do not come to an agreement with HMRC with 21 days then a bankruptcy petition would be filed.
If you cannot pay your tax bill, the court will make a bankruptcy order and a trustee would be appointed to use your assets to pay your bankruptcy costs and debts.
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