HMRC have issued a briefing paper which sets out their approach to collecting tax debts as the country emerges from the Covid-19 pandemic. Where clients are able to pay their taxes, HMRC’s message is that they should do so. However, those clients that are still struggling financially should contact HMRC to agree a payment plan based on their financial position. HMRC will contact taxpayers with a tax debt by phone, post or text message. It is important to encourage clients to respond to communications from HMRC so that they can discuss payment options, such as Time-to-Pay agreements. Clients may also be able to take advantage of other support on offer, such as the various Government-back loans, to enable them to borrow money with which to pay the tax that they owe.
If a client does not get in touch with HMRC and ignores communications from HMRC about the tax that they owe, HMRC may visit them at their home or business address. The visits will focus on making sure that the client is aware of their tax debt and the support available to them, as well as determining their financial situation and agreeing a plan for paying their outstanding tax. However, from September 2021, if a client is unwilling to agree a payment plan or continues to ignore attempts by HMRC to contact them, HMRC may start the process of collecting the debt using their enforcement procedures.
HMRC have stated that they will be sympathetic to businesses with temporary cash-flow issues to help them survive as the economy recovers; however, where a client has little chance of recovery, HMRC will act to recover any tax that they owe.
Clients with payment problems should be made aware of the Debt Respite Scheme, which is a new Government scheme under which clients can apply to a debt adviser for breathing space whereby creditors stop enforcement activity and interest and late payment penalties cease.
Written by the Tax Advice Network