Kevin McLeod
Written By Kevin McLeod
Licensed Insolvency Practitioner
July 20th, 2023

HMRC are a well oiled machine when it comes to collecting money. If you don’t pay your tax bill on time they have a refined and efficient system of escalation which we will outline in this article.

The key thing is not to ignore them, because this will hasten the escalation like nothing else.

Tax Bill

What Happens if I Can’t Pay my Tax Bill?

  1. You’ll received an automated reminder letter including a ‘determination’ of what they feel you owe
  2. Continued arrears will mean late payment penalties
  3. You’ll received interest charges, in addition to any penalties
  4. Threatening Letters will start to warn you on ‘impending enforcement action’ which means bailiffs.
  5. Any visits from bailiffs will add further charges to your existing HMRC debt
  6. Controlled Goods Agreement – If you can’t pay baliffs within 7 days, your goods will be auctioned
  7. Statutory Demand letter – this final demand letter is a strong gesture of escalation by HMRC and gives you 21 days to pay
  8. Winding up Petition – This final late payment threat gives a limited company just 7 days to pay before the case is heard in court. If the judge rules in favour of HMRC it will mean the immediate liquidation and closure of your company.

What are the Penalties for Not Paying?

HMRC have different penalties for the particular tax bill you’re in arrears for.

Can you pay HMRC in Installments?

HMRC are certainly open to installment payments, providing you fulfill their criteria. They are well aware that forcing companies into insolvency means they will be less likely to get their payments, so their position is generally supporting, providing you do not ignore or deceive them.

Negotiating a Time to Pay Arrangement (TTP) with HMRC

A time to pay arrangement is the official terminology for paying by installments. For HM and Revenue to agree to this:

  • You should not have an existing time to pay agreement in place
  • You’ll need to agree a monthly repayment, for not more than 12 months, that you can afford
  • Your payment plan will be set up with a direct debit
  • You’ll have to pay interest

Can HMRC Refuse a Payment Plan?

If they are not convinced you can pay, they will not agree to the payment plan.

Equally, if you’ve asked for multiple payment plans in previous years, there may come a point where they simply draw the line.

They are most likely to remain open if all of your dealings with them have been timely and efficient, your returns filed on time, and their letters answered promptly.

They will always ask for an update on your financial situation, including savings and assets, before agreeing. The lack of either of these is also going to contribute to a potential refusal.

Complaints and Appeals

After your payment plan has been refused you do have the option of asking to speak with someone more senior to see if another perspective may help.

You should be aware that if a payment plan is refused they will likely proceed with enforcement of some kind. At this point you should certainly speak with a firm such as ourselves to consider your options.

See HMRC’s late payment interest rates here.

Can HMRC Write off Debt?

HMRC will not generally write off debt even if the enforcement action necessary will actually cost them more than the debt itself. They recognise the precedents this type of action might set so instead they will quite comfortable forcing a company into liquidation even if they’re aware there are no assets to liquidate.