Expect a sea change in HMRC’s approach to tax debt as the economy emerges from the pandemic.
Protecting livelihoods. Keeping people in work. Helping businesses with temporary cash flow issues to
survive. These have been HMRC’s guiding principles on tax debt ever since Covid-19 began. That starts
to change this autumn.
What happens next?
As government support schemes wind down, so HMRC begins to return to something nearer its normal debt
collection procedure. Though it’s still committed to what it calls an ‘understanding and supportive
approach’, the word ‘but’ forms part of the updated messaging. It comes here: ‘But where businesses
have little chance of recovery, we do have a responsibility to act’. The emphasis is on supporting
‘viable businesses where we can’.
HMRC contact if there’s tax outstanding
HMRC urges any business or individual worried about paying tax to phone its dedicated Payment Support
Service as soon as possible. Where taxpayers don’t take the initiative, HMRC will itself make contact
and the importance of responding can’t be overstated. Initial HMRC triage for tax debt is to
establish if taxpayers can’t, or simply won’t pay, and cooperation here is vital. Failure to engage may
mean enforcement procedures are escalated to the next level.
HMRC messaging: ‘If you can pay your taxes then you should do so – but if you’re
struggling, we want to work with you to agree a plan based on your financial position.’
HMRC support includes Time to Pay repayment plans for tax. These are arranged to fit individual
circumstances, with the aim of paying as quickly and affordably as possible. But HMRC will also
consider short-term deferrals where nothing is paid for a short set period.
If a business has used a government loan support package, like the Bounce Back Loan Scheme, HMRC
expects it to use the flexibility this provides to the full. This could mean, for example, including
extending repayment terms, to maximise the chance of keeping tax payments up to date. It also advises
that the existence of such a loan doesn’t preclude HMRC debt collection activity: even, as a last
resort, pursuing for insolvency.
If taxpayers fail to respond, or refuse to pay, HMRC may want to visit either the home or business
premises. But the aim at this stage is still to agree a payment or payment plan without further action.
From September 2021, HMRC may start the process of collecting tax debt using its enforcement powers,
where someone is unwilling to discuss a payment plan or ignores its attempts to make contact.
Whilst the emphasis is still on a ‘cautious approach’ to debt enforcement action, HMRC powers are
extensive, and it is obviously wise to take appropriate action before this stage is reached. Where a
company is considering a Company Voluntary Arrangement, early engagement with HMRC is particularly
If you have any concerns about the payment of tax, please talk to us for further advice.