Guidance: What will happen if you do not pay your tax bill

If you cannot pay the tax you owe in full and on time HMRC can work with you to find a way for you to pay what you owe:

• as quickly as possible
• in a way that is affordable for you

If you have a tax debt, except in cases where we suspect fraud or criminal activity, we will try to contact you to talk about your situation and agree a way forward before we take any action.

We may:

• ask you to agree a payment plan based on your financial position, called a Time to Pay Arrangement
• use any overpaid tax that would normally be repaid to you to clear other outstanding tax debts you have
• adjust your tax code to collect any outstanding tax debts, if you receive PAYE income

You should reply as soon as possible, so we know you need support and are not refusing to pay what you owe.

If you do not engage with HMRC or refuse to pay what you owe

If you do not respond when we try to contact you, we may visit you at your home or business address to try and work with you to settle the tax you owe. This will help us understand your personal circumstances (for example, if you need extra support).

During our visit we’ll:

• ask about your financial situation and your ability to pay
• try to agree how best to settle the debt with you, which might be making one full payment or paying through instalments using a Time to Pay Arrangement

In 4 out of 5 cases we reach an agreement with our customers. If we cannot reach an agreement with you, we may use our enforcement powers to collect the debt.

What our tax debt enforcement powers are and when we use them

If we are unable to contact you or you refuse to pay what you owe, we have debt enforcement powers to help us collect outstanding tax. We only use these as a last resort and they can be different for each country in the UK.

We will choose which powers are appropriate depending on your circumstances.

The following list of our enforcement powers are not listed in any particular order.

Taking your possessions to cover the debt

We can use ‘Taking Control of Goods’ regulations in England and Wales, and ‘Distraint’ in Northern Ireland to remove and sell assets to cover debts. In Scotland, we can use a Summary Warrant.

In England and Wales, we will first issue you with a formal Notice of Enforcement that will cost you £75.

An HMRC officer will then visit you between 6am and 9pm if you live in England or Wales, or between sunrise and sunset if you live in Northern Ireland. They will ask you to pay your debt. If you do not pay, the officer will list your possessions which may be able to be sold to cover the debt and the costs to sell the items (for example, fees for auctioneers or advertising).

We will either take the possessions from your premises immediately, or ask you to sign a:

• Controlled Goods Agreement if you live in England and Wales
• Walking Possession Agreement if you live in Northern Ireland

The agreement will include a deadline for you to pay what you owe. You can continue to use the items but you cannot sell them or give them away while the agreement is in force.

If you do not follow the terms of the agreement or pay what you owe by the deadline we can remove the possessions and sell them. We will write to you to give you notice before we do this.

Although the possessions can only be listed by an HMRC officer, they can be collected by private auctioneers employed by us.

Whoever is collecting the goods can use a locksmith to enter premises to remove the goods, if necessary. They do not need a warrant from the courts or have to give any notice to you first.

If the possessions sell for more than the debt, you will be paid the difference after the deduction of costs and fees. If they sell for less than the debt, you will have to pay the difference, and we will continue enforcement action until the debt is settled.

The following fees apply and will be covered by the sale of your possessions.

England and Wales

A fee of £235 will be charged for HMRC taking control of your possessions, plus 7.5% of the proportion of the main debt over £1,500.

For possessions we remove and sell at auction there is a fee of £110, plus 7.5% of the proportion of the main debt over £1,500.

Northern Ireland

If you owe:

• less than £100 there is a fee of £12.50
• more than £100 there is a fee of between 0.25% and 12.5%, depending on the debt amount

For possessions we remove and sell at auction there is a fee of between 7.5% and 15%, depending on the auction.

Possessions we will not take

We will never take your possessions that are essential for your security and wellbeing.

There are specific guidelines on what we can take and we follow them at all times. The guidelines are in the:

Using a Summary Warrant to recover the debt (Scotland only)

In Scotland, we are authorised under Section 128 of the Finance Act 2008 to apply to a Sheriff Court to obtain a Summary Warrant in respect of a debtor’s debt.

A Summary Warrant is a type of court order which is granted for debts.

When a Summary Warrant is granted, we will instruct a court-appointed official (called a Sheriff Officer) to serve a charge for payment if you owe tax. You will then have 14 days to either:

• pay your outstanding debt
• agree a payment plan to pay the tax owed in instalments

If you disagree with the debt amount you must contact us as quickly as possible, to explain why you think the amount is wrong.

If you have not paid the debt after the 14 days, we may instruct the Sheriff Officer to carry out what we consider the most appropriate ‘diligence’ action. We may use any or all, of the following ‘diligence’ actions to avoid us proceeding to insolvency:

• recovering the debt from a bank account (Bank Arrestment)
• recovering the debt through your earnings (Earnings Arrestment)
• seizing and selling your possessions (Attachment)
• recovering money from a till in a shop (Money Attachment)

Recovering the debt directly from your bank account

Creditors like HMRC (or those acting on a creditor’s behalf) can recover debts directly from customers’ bank and building society accounts.

For HMRC, this can apply to customers in England, Wales and Northern Ireland who:

• owe £1,000 or more
• have enough funds in their bank accounts to cover the debt and their reasonable living costs

This is called ‘direct recovery of debt’.

In Scotland, a Summary Warrant can be used.

There are strict rules to make sure:

• customers do not suffer serious difficulty due to money being taken directly from their accounts
• enough protection is in place for vulnerable customers

You can find out more in the Issue Briefing: Direct Recovery of Debts.

Recovering the debt through County Court proceedings, property and pensions

We can use County Court processes if you have assets to cover the debt and refuse to pay it.

In Scotland, a Summary Warrant can be used.

We will review your personal circumstances before deciding which of the following options to use.

Charging orders

A charging order is an order of the court. It stops a debtor from selling specified assets without first paying what the court has ordered they must pay out of any proceeds.

The most common asset subjected to charging orders in the UK is land or property but charging orders can be placed on other assets, such as some financial products including:

• securities
• stocks and shares
• trusts
• personal equity plans
• Individual Savings Accounts (ISAs)

Charging orders give creditors like HMRC the power to recover debts from the sale of a property:

• when the customer who owns the property sells it
• through a court action known as an ‘order for sale’, to force the customer to sell the property

In Northern Ireland, we can obtain a charging order over land or property through a civil court process by the Enforcement Judgement Office. Property charging orders do not apply in Scotland.

We do all we can to avoid forcing customers owing tax to sell their primary residence. We have only forced the sale of customers’ residences where the customer has either:

• more than one property
• been involved in criminal activity

We will not make you sell your main home to fund a loan charge or disguised remuneration tax bill.

If we try to recover a debt through property charging orders and orders for sale, the court will decide whether to grant the order.

We may also ask you to consider releasing equity from your property to either:

• settle your debt quickly and reduce interest
• shorten a Time to Pay Arrangement

We may ask some wealthy customers who have a lot of equity in property or properties to release equity to clear their debt or reduce the amount of time they need to pay it. If they do not, we may proceed with insolvency.

Attachment of earnings orders

If you are in debt and in PAYE employment, the County Court can grant us an ‘attachment of earnings order’, or an ‘Arrestment of Earnings’ in Scotland.

These will allow regular deductions to be taken from your wages to pay your debt. Safeguards will be put in place to make sure you will have enough money to cover your essential expenses.

Third party debt orders

If you are in debt and someone else owes you money, we can apply for a third party debt order. The order will allow us to take direct payment from whoever owes you money to pay what you owe.

Third party debt orders only apply in England and Wales.

Similar actions are available under Distraint in Northern Ireland, and a Summary Warrant in Scotland (known as arrestment).

Pension payments

We consider pension payments as income, including any lump sums you may receive when you retire. We will consider pension payments in our assessment of your ability to pay the tax you owe.

We will not ask you to draw on funds from any of your pension pots to pay your debt to us.

Insolvency

We will only apply to the courts to make a person or company insolvent as a final course of action, after we have considered all other ways to recover a debt.

Insolvency usually only applies when one or more of the following are met:

• we think a customer’s debt position will not be recovered and they will not be able to pay future debts
• a customer who can pay what they owe has actively gone out of their way to avoid paying
• we suspect a customer is not being honest about the assets they hold, and we think they could pay quicker

When we take insolvency proceedings against individuals, partnerships or companies we are the same as any other creditor and are strictly bound by the requirements of insolvency law.

The insolvency processes we are involved in include, but are not limited to, the following.

Voluntary arrangements

For companies, a Company Voluntary Arrangement will need a licensed insolvency practitioner to put forward a proposal to creditors. The company directors will review the company’s past history and future trading prospects with the insolvency practitioner. If all parties are satisfied that there is a workable way forward for the company, a proposal explaining how its debts are to be dealt with can be considered by its creditors.

For individuals in England, Wales and in Northern Ireland, an Individual Voluntary Arrangement can be proposed on an individual debtor’s behalf by an insolvency practitioner. To work out a suitable payment plan, they will need to submit information about their:

• total debt position
• income and expenditure details

In Scotland, a debtor can choose to sign a trust deed, so regular payments are made to an insolvency practitioner to distribute to creditors.

When we are a creditor, we are invited to vote in favour, against or abstain on arrangement proposals.

Before making a decision, we will consider the paying of the debt and also assess customers’ likely ability to pay future taxes. As part of this, we will confirm with whoever is proposing the arrangement that steps have been taken to correct whatever went wrong. This will make sure that supporting the voluntary arrangement will not put future tax at risk.

When we are considering any arrangement proposal, we always look to support customers with temporary financial difficulties. We look positively at proposals where:

• a customer’s circumstances are explained fully and honestly
• the offer being made is achievable and is the best outcome for the country’s vital tax revenues

For all kinds of voluntary arrangement, no creditor is able to press for payment of debt that is included in the arrangement until it is agreed. If the arrangement fails, creditors regain the right to pursue the outstanding debt.

Find out more about HMRC’s Voluntary Arrangements Service that helps and support businesses in temporary financial difficulties.

Company moratoriums using the Corporate Insolvency and Governance Act

When a company registered in the UK is in financial difficulty and has applied for a moratorium (a legal authorisation to debtors to postpone payment), it will be given time to restructure their finances.

We (along with other creditors) will stop recovery activity for 20 business days. This period can be extended to 40 business days, or a court can extend if up to a maximum of a year.

We will supply the details of the company debts to an insolvency practitioner who has been appointed to oversee the moratorium. We will be able to vote on any restructuring plan if the company proposes this to their creditors.

The moratorium will be reviewed by us to make sure the company:

• is meeting the conditions of the moratorium
• remains capable of recovery to pay its debts

Bankruptcy and winding up orders

A bankruptcy or winding up order may be granted because either:

• a creditor has petitioned for insolvency to the court
• an individual has applied for their own bankruptcy

In some cases, a licensed insolvency practitioner may be appointed. For an individual debtor, the insolvency practitioner appointed is known as the trustee. If the debtor is a company the insolvency practitioner is known as the liquidator.

The trustee’s or liquidator’s statutory duty is to realise a debtor’s assets and distribute them to the creditors.

We do not control or direct the insolvency practitioner’s actions.

HMRC and debt collection agencies

We may use one of the following debt collection agencies to contact you on our behalf, to discuss settling your debt:

• 1st Locate (trading as LCS)
• Advantis Credit Ltd
• Bluestone Consumer Finance Limited (trading as Bluestone Credit Management)
• BPO Collections Ltd
• CCS Collect (also known as Commercial Collection Services Ltd)
• Moorcroft Debt Recovery Ltd
• Oriel Collections Limited
• Past Due Credit Solutions (PDCS)

All the debt collection agencies we work with are regulated by the Financial Conduct Authority and must follow our processes and guidance at all times. We carry out regular reviews to make sure they do.

A debt collection agency working for us will only contact you by letter, SMS text message or phone. They will never visit you at your home or place of work.

You can either:

• pay what you owe us to them, if you are able to — once your payment has been cleared the agency will send it to us to credit to your HMRC account
• talk to them about how you can pay your debt using a Time to Pay Arrangement

If you cannot pay what you owe in full or agree a Time to Pay Arrangement the agency will pass your case back to us to deal with. We will then contact you to tell you what will happen next.

Debt collection agency phone calls

When you speak to a debt collection agency on the phone, they will always ask you some security questions at the start of the call — this is to protect you and the confidentiality of your personal tax affairs.

They will not be able to talk to someone else on your behalf unless you give them consent to do so in the call — this lasts for 24 hours for each debt you discuss with them. If you want someone to act on your behalf for more than 24 hours, you will need to give HMRC written authority for them to do so by completing a form 64-8.

If you tell the debt collection agency that you have an agent acting for you, they will need to check with us that they are authorised to speak to them before they can contact them. This may mean there will be a short delay in dealing with your case.

Get help and extra support

We know that some of our customers need extra support and understand they may have debts to other creditors as well as HMRC.

You should contact us as soon as you can if you’re having problems making a tax payment.

If you’re struggling to pay HMRC and other creditors you can get free independent debt advice on the MoneyHelper website.

You can also nominate a professional tax agent, a friend or a family member to deal with your HMRC tax affairs on your behalf.