As the economy emerges from the pandemic, we should expect a sea change in HMRC’s approach to recovering tax debt.
Protecting livelihoods, keeping people in work, and helping businesses with temporary cash flow issues to survive. These have been HMRC’s guiding principles on tax debt since the start of the COVID19 pandemic. Now things are starting to change.
How is HMRC’s approach changing?
Now the government support schemes have been wound down, HMRC is beginning to return to something nearer its normal debt collection procedure. Although it’s still committed to what it calls an ‘understanding and supportive approach’, the word ‘but’ forms part of the updated messaging: ‘But where businesses have little chance of recovery, we do have a responsibility to act’. The emphasis is now on supporting those ‘viable businesses where we can’.
Contact HMRC 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. Cooperation here is vital; failure to engage may mean enforcement procedures are escalated to the next level.
HMRC says, ‘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.’
Negotiating Time to Pay
HMRC support includes Time to Pay repayment plans for tax. Payment plans are arranged to fit individual circumstances, with the aim of paying as quickly and affordably as possible. 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, extending repayment terms to maximise the chance of keeping up to date with tax payments. HMRC also advises that the existence of such a loan doesn’t prevent HMRC debt collection activity – even, as a last resort, pursuing insolvency.
When taxpayers refuse to pay
If taxpayers fail to respond, or refuse to pay, HMRC may want to visit either the home or business premises. Although the aim at this stage is still to agree a payment or payment plan without further action.
Where someone is unwilling to discuss a payment plan or ignores its attempts to make contact, HMRC may now start the process of collecting tax debt using its enforcement powers.
Whilst the emphasis is still on a ‘cautious approach’ to debt enforcement action, HMRC powers are extensive. It is obviously wise to take appropriate action before things get to this stage. Where a company is considering a Company Voluntary Arrangement, early engagement with HMRC is particularly important.
If you have any concerns about the payment of tax, please talk to us for further advice.