Will HMRC make a deal with me?

Failure to pay your HMRC tax bill on time, or refusal to pay, will lead to interest accumulating on the debt until it is paid off, potentially followed by legal action, including potential bankruptcy or other insolvency proceedings.

HMRC offer an opportunity for anyone to let them know voluntarily that extra tax should be paid by the individual concerned. Making a declaration of that kind normally removes the ‘penalty regime’ from negotiations and hence can mitigate some of your perceived issues, and whilst you may still be liable to an interest charge, matters are normally resolved by mutual agreement and in a non-confrontational way and without involving penalties.

If you are unable to pay any debt immediately, HMRC can negotiate with you, and agree a plan moving forward which may include monthly or other instalments, or sometimes simply an extension on the deadline to pay. It would be very rare for them to not agree any reasonable proposal. Just remember to be reasonable with what you are suggesting.

The roadmap for such negotiations depends on the type of tax bill you are presented with.

Routine Debts – not the subject to any special issues, are almost without fail, best resolved by corresponding with HMRC before the first payment falls due, as they usually cannot charge penalties in such cases. So, it becomes something of a simple arrangement like a normal bank type loan, with regular payments until the debt is cleared.

Self-Assessment Tax: If you are having difficulties paying your Self-Assessment Tax, you may even be able to set up a payment plan online, without having to contact HMRC to do so.
You can do this if:

• The bill is £30,000 or less,
• Your tax returns are up to date,
• You have no other outstanding payments to be made to HMRC, and
• It is less than 60 days after the deadline for the payment.

Other taxes: For an inability to pay other forms of tax, you should still communicate with HMRC to arrange a Time to Pay Arrangement.This will depend on the status of the bill and whether or not you received a payment demand.

• If you have received a payment demand, a letter threatening legal action or a tax bill, you would need to contact the HMRC office which issued you with the notice. The individual handling the debt is likely to want some extra details, but can normally come to an agreement with you, provided you keep them informed of your difficulties.
• If you have not received such a demand, you should call the Payment Support Service. They are also likely to want to know why you cannot pay, but again are largely sympathetic to your needs if they find them believable.

Exceptional Duties can arise in investigations

In an investigation matters get more complicated, and it can depend on who you are dealing with. However, in general the investigating officer assigned the case by HMRC, usually has some discretion. They may be aware of weakness in their arguments and so be prepared to compromise some of the debts. However, that simply leads us to the final debt at the end of the enquiry. The investigating officer is not normally part of the debt payment process and has to follow a process. However, they do have some guidelines, and recently these have enabled agreements to settle debts going over several years, rather than the more rigid 2 or 5 year maximum they used to employ. Hopefully, following the Covid Hiatus, they will continue to be more reasonable and commercial in their approach.

If you cannot pay because of the impact of Covid-19 on your business, you may be able to claim a grant via the Self-Employment Income Support Scheme. If the impact of Covid-19 has affected your ability to pay other taxes, you can contact the HMRC coronavirus (Covid-19) helpline.

When doing any of the above though we do advise seeking legal or financial advice, as it is far easier to get it right the first time than struggle with further enquiries. At Garrick Law, we would be able to assist in any case, and direct you to the relevant specialist if needs be.

This Guest Blog was written by Forensic Investigations & Taxation Services Ltd (FITS London).

FITS have many years of working in HMRC and the private sector in restructuring, tax and insolvency work, so can offer advice to such clients, to see if they can help them out of that situation, whether that means they either don’t want to liquidate, don’t need to liquidate or can’t liquidate and they need someone to negotiate with HMRC and/or other creditors on their behalf. Click here to view FITS London’s website.