In the upcoming months, HMRC will begin to return to something nearer its normal debt collection procedure. Though it’s still committed to what it calls an ‘understanding and supportive approach’, the word ‘but’ now forms part of the updated messaging. It comes here: ‘But where businesses have little chance of recovery, we do have a responsibility to act’. The emphasis is on supporting ‘viable businesses where we can’.
HMRC urges any business or individual worried about paying outstanding tax to phone its dedicated Payment Support Service as soon as possible. However, where taxpayers don’t take the initiative, HMRC will itself make contact; 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. Co-operation here is vital. Failure to engage may mean enforcement procedures are escalated to the next level.
HMRC messaging: ‘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.’
HMRC support includes Time to Pay repayment plans for tax. These are arranged to fit individual circumstances, with the aim of paying as quickly and affordably as possible. But 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, such as 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 tax payments up to date. It also advises that the existence of such a loan doesn’t preclude HMRC debt collection activity; even, as a last resort, pursuing for insolvency.
If taxpayers fail to respond, or refuse to pay, HMRC may want to visit either the home or business premises. But the aim at this stage is still to agree a payment or payment plan without further action.
This Autumn, HMRC may begin the process of collecting tax debt using its enforcement powers, where someone is unwilling to discuss a payment plan or ignores its attempts to make contact.
Whilst the emphasis is still on a ‘cautious approach’ to debt enforcement action, HMRC powers are extensive, and it is obviously wise to take appropriate action before this stage is reached. Where a company is considering a Company Voluntary Arrangement, early engagement with HMRC is particularly important.
If you have any concerns about outstanding tax, please talk to us for further advice.