HRMC have published its policy document, 'Collecting tax debts as we emerge from coronavirus (COVID-19)'. It warns that should companies or individuals ignore HMRC, the agency would initiate enforcement action after a September 2021 deadline.

The policy document outlines its process in handling Outstanding debt to HMRC. It takes a sympathetic tone on individual and company debt but ultimately warns it will take enforcement action should nothing be done by 21 September 2021.

HMRC warn that where businesses have little chance of recovery it may have to take action, "We do have a responsibility to act, not least to protect their competitors and viable businesses in their supply chains. It is in no one’s interest to simply allow unsustainable debt to build up unchecked."

Process

Should an individual or business have an outstanding debt with HMRC, it will begin a Process to regain it.

HMRC warns that ignoring these communications means that it cannot differentiate between those in genuine need of support or those simply refusing to pay.

For those with financial difficulties HMRC undertakes to discuss:

  • Affordable payment options, such as a payment plan (Time to Pay). HMRC states that it has more than half a million arrangements in place at any one time with more than nine out of ten of them complete successfully.
  • As part of agreeing Time to Pay arrangements with businesses, HMRC may offer advice on other forms of support that may be available:
  • For people that cannot pay anything straight away, HMRC requires communication in order to better understand circumstances.
    • A short-term deferral may be available. Nothing would need to be paid for a set period of time.
  • Debtors may be able to use The Debt Respite Scheme, a new government scheme available in England and Wales. Scotland has its own Debt Arrangement Scheme. HMRC is part of the Debt Respite Scheme, under which customers can apply to a debt adviser for breathing space where creditors stop all enforcement activity and all interest and late payment penalties stop.

Refusal to pay

Where customers do not respond to any HMRC communications or refuse to pay when they can afford to, they will be visited by HMC officers. 

  • From September 2021, where people are unwilling to discuss a payment plan or ignore attempts to contact them, HMRC may start the process of collecting the debt using enforcement powers. These powers include:

HMRC will only consider collecting tax through insolvency proceedings where customers have been found to be:

  • Fraudulent.
  • Deliberately non-compliant.
  • Where they are continuing to accrue debt with no prospect of being able to settle their existing debts.

Useful guides on this topic

Compliance
This section covers HMRC powers, anti-avoidance measures, overpayments and special regimes.

Tax debts and insolvency
This guide looks at the treatment of tax debts to HMRC in insolvency cases.

Direct recovery of Debts (enforcement by deduction from accounts)
When can HMRC recover debts directly from persistent non-payers?

Information powers
How does HMRC gather information? What information do they already hold? What rules should you be aware of?

COVID-19: Loan funding
From 6 April 2021 companies can apply for loans to support their businesses under the Recovery Loan Scheme. In preparation for non-essential retail and outdoor hospitality reopening next week can access loans.

External links

The Insolvency Service: Debt Respite Scheme (Breathing Space) guidance


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