What is it and how can it help?
Her Majesty’s Revenue and Customs (HMRC) handles debts relating to Income Tax, VAT arrears, tax credit overpayments and National Insurance. Upon owing any of these ‘priority’ debts it is best to try and settle as soon as possible. HMRC have some assistance in place.
The HMRC Debt Management and Banking Department is a support service run by HMRC to help taxpayers (individuals and companies) with paying their debts. (NOTE: this is for taxes in the future and not for use with tax debts due for past payments).
Be sure to contact the specialist Department if you are in need of setting up a tax payment plan because you owe tax and are unable to pay HMRC. They understand how HMRC's Enforcement Department (the main department that collects taxes) works and can offer guidance in how best to approach them.
So how can they be contacted?
You can call the HMRC debt management helpline: Monday to Friday, 8am – 8pm: 0300 200 3887.
If you are aware that you will not be able to pay the tax bill in full before your payment deadline then you should instead call the Business Payment Support Service on 0300 200 3835; open 8am – 8pm Monday to Friday and 8am – 4pm on Saturday.
For those authorised as a tax agent or adviser for clients, wishing to discuss PAYE, VAT, Self-assessment or tax credit queries, there is an Agent Dedicated Line. See more information here.
One particular role the department has is send warning letters.
When you are behind on paying tax, either late to pay or have not yet paid, then the HMRC debt management department have the task to issue reminder letters and chase for payment with the threat of further actions if payment is not made. And this is just stage one. Letters, penalties and enforcement actions will come rapidly. It is a key function for those within this department.
What does the letter cover?
Ultimately the letter covers the following:
- The amount HMRC believe you owe
- Details of how to pay
- Next steps and what action may be taken if the debt is not paid
There have been scams where debt management letters have been sent but not from HMRC. Look out for a legitimate website address and phone number – matching to that on the www.gov.uk website. Note that all HMRC helpline numbers will begin with 0300. Look for correct grammar and no requests for bank details.
Remember to Check The Calculation
One thing is for sure. No one is perfect and correct each and every time. Even HMRC can make errors in calculations. So be sure to not assume the calculation is accurate just because it comes from a large government organisation. Always double check and back track records to ensure what you owe is correct.
When contacting HMRC it is crucial that you are prepared and have all necessary information to hand. Such information includes:
- Your name and address
- Your tax reference
- The registered company name and address
- Details regarding why you are struggling to pay your tax bill
- What you have done to raise the money
- How much you can pay now
- An approximation of how much time you need to repay the outstanding balance
- Information regarding the companies assets, cashflow and expenditure
What options are there?
Individual Voluntary Arrangement (IVA)
This is a formal arrangement between you and your creditors, allowing time for you to pay back your debts over an agreed and specified time. Note: HMRC do accept IVAs but usually have their own guidelines about the circumstances in which they’ll accept this. Speak with an insolvency practitioner such as us at Company Rescue who can help you prepare a proposal for HMRCs consideration.
Time to Pay Arrangement
These are monthly instalments over a period of twelve months (usually). Be aware that all other taxes must be paid when due or this arrangement will go into default. This would mean HMRC are likely to doubt the company’s ability to pay its future payments and so any chances of reaching a further agreement to settle the debt will be halted. Hence, we advise you to get assistance in proposing such a plan to ensure you can realistically afford it.
Debt consolidation
Taking out a new loan in order for existing debts to be covered. This simplifies your repayment process and helps reduce interest on any debts. However, this can make the situation worse if it is done without a clear understanding of the fine print of all the loans involved. Therefore, you must consider this option strategically.
Debt management plan
A formal arrangement made between you and your creditors so you can pay off your debts. Unlike an IVA, creditors can still take legal action during this process.
Debt relief order
This is a low-cost alternative to bankruptcy. However, this is not suitable for companies; only for individuals living in England or Wales with few assets (£1000 max worth) and minimal debt (less than £20,000). The debt-relief order freezes any interest and repayments for 12 months and after that period debts will be written off.
What if an agreement cannot be reached?
If no agreement is made, the debt management department are likely to ask you some questions about your personal finance situation to see if you can settle the debt or not. They must be satisfied that you are being honest in attempting to pay the debt and are not withholding funds for other things non-related.
A debt management officer will be appointed to handle your case and it is there job to challenge any expenditure they see as unnecessary.
If an agreement cannot be reached and/or the debt is ignored completely, enforcement action will be taken by HMRC. This is done so they can collect the money owed. There are various ways this is done. For more information see our guide here: HMRC enforcement action.
What if I cannot pay?
When you cannot pay you must act quick. Ultimately, it is a warning sign and triggers potential insolvency as per the insolvency test criteria.
What options do I have?
Speak with a licenced insolvency practitioner. For example, us at Company Rescue. We have years of experience in dealing with HMRC, especially in proposing realistic TTPs.
Propose a company voluntary arrangement (CVA) to HMRC. This is a proposal to restructure the debt, for example paying monthly repayments to creditors, over an agreed period of 3-5 years. Note that in this scenario some of the debt may be approved to be written off
Seek funding from elsewhere i.e. invoice finance, bank loan, sales of assets
Place your company into administration. In doing this you cease any legal action, being protected by a moratorium, whilst you work with an insolvency practitioner to plan the next steps which may involve a CVA or voluntary liquidation
Place your company into a creditors voluntary liquidation. This will allow no chance of rescue – it means the end for your company. Under this procedure you simply follow the steps and have assistance in shutting your company down.
So, all in all, do your best to avoid enforcement action and contact HMRC as soon as a payment has been missed or in advance of the payment deadline if you know you will be unable to pay. Delaying these sorts of priority payments will only make the problem worse.
For any queries and/or guidance in dealing with outstanding payments to HMRC and the options available to you, contact our team of experts today on 0800 970 0539
: HMRC Time to Pay Arrangement