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Dealing with HMRC tax debts

Sharon McDougall - Updated - 7th August 2023 - 3 minutes to read

Her Majesty’s Revenues and Customs (HMRC) is one of the biggest creditors in Scotland, and indeed across the rest of the UK. Millions of people make payments to the government through HMRC in the form of income taxes, National Insurance and VAT every year. For the majority of people in employment, this is done automatically through deductions taken directly from their salary.

However, for those operating as sole traders, or as directors of limited companies, the process is different and it is not unusual for individuals and companies to get behind in their HMRC obligations. This could be from a lack of planning, poor money management, or even from a lack of knowledge about what taxes they are liable to pay.

There are thousands of people around Scotland and elsewhere who find themselves unable to settle the debts they owe HMRC at the time they are being demanded. Failing to pay money owed to HMRC can have serious consequences and involve legal charges or bailiff visits.

So although you are far from alone in having HMRC debts, bringing your tax debts up to date and settling any amount due should be a matter of urgency. If immediate payment in full is not possible, then at the very least you need to be completely open and honest and approach HMRC with full transparency as to your situation.

How to plan ahead with tax payments?

Planning ahead and budgeting wisely is a sensible approach to managing your finances whatever your situation, but if you are struggling with HMRC debts then it is a particularly important course of action. Plus, it is yet even more crucial to plan ahead if you are self-employed or you run a business of any sort as, unlike ordinarily employed individuals, you’ll be obliged to work out the taxes due and pay these by way of a single sum of money on an annual basis.

How to inform HMRC if struggling with paying tax?

It is often very difficult for self-employed individuals to budget sufficiently well so that they can pay off their income taxes in full on the day they are due, which, for many people, is the reason they are heavily indebted to HMRC. If this is your situation and you’re worried about your ability to afford your taxes then you should get in touch with HMRC directly to explain your situation.

If you call HMRC to discuss your arrears then they will try to get you to pay as much as you can, however, they will also understand that you can’t pay money you don’t have. By calling in person, you can sometimes avoid facing late payment penalty fines and you should be able to establish a plan of action regarding how you might work towards paying off the debts that you owe. This is typically done through a Time to Pay (TTP) arrangement which is negotiated between yourself and HMRC.

Stick to your side of the bargain

Assuming you’ve been able to come to some sort of arrangement regarding your repayment of HMRC tax arrears, such as a TTP, then it is vital that you stick to the terms laid out. HMRC isn’t generally interested in adding charges to your account or keeping you indebted, as some commercial lenders might be. All that matters to HMRC is that you find a way of paying off the debts you owe in full. There is usually flexibility available when it comes to setting out a repayment plan but failing to adhere to its terms can lead to the agreement being terminated and a demand for immediate payment in full.

Get help

If you do reach the point at which HMRC is demanding immediate payment of all tax arrears then it’s important to get help. Failure to address this problem could lead to visits from HMRC bailiffs and the threat of court action against you. In extreme case this could lead to you being declared bankrupt, or insolvency action being started against your limited company.

Scotland Debt Solutions provide straightforward guidance on all issues regarding personal and business debt and can explain what kind of debt solution might work best for you based on your individual circumstances. Call us directly for a free consultation and to find out how you can set yourself on the road to becoming debt-free.

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Sharon McDougall


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