HMRC Guidance on Collecting Debts

HMRC Guidance on Collecting Debts

October 05, 2020

If you do not pay your tax bills, whether it is your self-assessment tax, Corporation tax, VAT or any other statutory payments, HMRC can go for enforcement action to recover the payments from you. And this arrangement is something most us would like to avoid. Sometimes, this can become a nightmare if you are unwary. Needless to say that you may end up paying interest and penalties.

Therefore, it is always better to take precautions to avoid these unwanted circumstances. The best thing to do to avoid enforcement actions is to contact HMRC whenever you miss any payment or you cannot make the payment on time. If they agree you can pay your bills in instalments or can get extra time to pay as well.

Due to the COVID-19 outbreak many businesses and individuals are facing cash flow problems. Therefore, let’s run through some best options that are available for you in case you cannot pay your taxes on time.

A. Self-assessment tax bill

HMRC has announced that due to coronavirus this year, you can defer your payment on account due on 31st July 2020 until 31st January 2021. This means if you have missed this payment they will not charge you any interest or penalties. However, you have to make sure that you pay it on or before 31st January 2021.

Particularly for self-employed people who are adversely affected by COVID-19, HMRC has announced Self-employment Income Support Scheme.

If you cannot pay due to any other reason

In case you owe £30,000 or less then you have the option of requesting Time to pay arrangement online with HMRC. You can call HMRC Self-assessment Helpline if you have already missed your payment date or you cannot apply online.

B.  For other Taxes

You have the option to set up a Time to pay arrangement with HMRC.

What is Time to Pay (TTP) Agreement?

Under the Time to Pay arrangement HMRC can permit viable taxpayers to make their payments over a period in instalments. This arrangement is made based on the Taxpayer’s ability to pay, generally HMRC gives you a few months’ time.

Time to pay arrangement over 12 months can be availed in special circumstance and it totally depends on HMRC. Generally, you get the option to pay monthly instalments; however, in exceptional cases you get short period or payment deferral as well.

Key points –

1. HMRC will give you this option only if they believe that you cannot pay your liability on the actual due dates.

2. It is only agreed if HMRC believes that you can afford the payments as agreed.

3. These arrangement are case to case basis and totally as per the HMRC’s discretion.

4. HMRC will never reduce the actual tax due under this arrangement.

5. HMRC can withdraw the agreement in case of certain cases, like if you misled them or been untruthful.

6. HMRC can change the arrangement if your financial position changes.

If you have received demand letter for payment or any letter stating legal action can be taken against you. Then call HMRC office that has sent you the letter.

If you have not received any letter but you know that there is a liability to pay then please call HMRC Payment Support Services.

If you are the nominated partner of a partnership business then you can agree a Time to Pay set up on behalf of the partnership.

The bottom line is that if you foresee that due to current COVID-19 or any other reasons you cannot pay your tax bills on time or fully in one go then contact HMRC in advance to avoid the complications of enforcement actions.

We at Doshi & Co. have been helping our clients by preparing their HMRC tax returns on time, in order they can organise their tax payments on time to avoid interest and penalties. Our proactive Tax services always ensure that you know your tax bills well in advance. And our tax know-how makes it certain that you pay the correct legal minimum tax bills.