Of all priority debts, arrears relating to Income Tax (PAYE), VAT or National Insurance are among the most serious. If you have fallen behind on payments to Her Majesty’s Revenue and Customs (HMRC), you need to act quickly.
If you have to submit a tax return or self-assessment, have you completed it? HMRC are reluctant to enter any serious discussions or negotiations if they are awaiting outstanding information from you. You need to deliver any outstanding information to them as a matter of priority.
The consequences of ignoring HMRC debt are very serious indeed and will likely result in court action or bailiffs being called upon. If you owe money to HMRC, we’ve got some invaluable advice.
I have built up arrears with HMRC – what should I do?
Firstly, check that the bill you have been sent by HMRC is correct. This is a particularly important step if the debt relates to your tax return. Check that you have provided the right income and expenditure figures. If you haven’t, the figure HMRC is claiming you owe may be incorrect.
If you are satisfied the amount owed is correct, start work immediately on a budget. List your income and expenses. Ignore unsecured loans such as credit cards; the consequences of not paying that type of debt is of far lesser concern than those of failing to pay HMRC arrears. Review your outgoings and cut through them with a scythe. Remove anything which is not a crucial expense. When finished, you’ll know how much you can put towards paying off your HMRC debt.Contact HMRC and explain your situation. Tell them you want to pay your debt, but that you can only do so with the amount your personal budget allows. Share your budget with them; this will demonstrate a genuine will on your part to pay them back.
Once a payment scheme is agreed by HMRC, stick religiously to your budget. Do that, and you’ll pay off what you owe without fuss and remove any chance of court action against you.
What happens if I can’t pay back HMRC?
If you fail to address your HMRC arrears, they will not hesitate to take action. This could come in a number of forms:
- They may seek a County Court Judgment (CCJ) against you Bailiffs may be called upon and instructed to recover the money you owe by seizing your possessions
- If you owe less than £2,000, they can summon you to a court hearing. If this happens, be sure to turn up with your personal budget and offer to pay in instalments
- If you owe more than £5,000, HMRC are within their right to start bankruptcy proceedings against you
- If you work for an employer and if your debts are between £3,000 and £30,000, HMRC can collect your owed tax by altering your tax code, thus taking the money directly from your wages