Dealing with Tax Debt

When you are struggling to cope

Common causes of distress with tax debt are threatened recovery action involving distraint or bankruptcy proceeding.

There is more complete advice on tax debt in our Tax Debt Guide but the key points about distraint and bankruptcy are:

1)      HMRC has a right to legally taking possession of goods – without a court order. Assets such as vehicles can be particularly at risk. The best way to avoid distraint is by making contact with HMRC, ensuring that your tax returns are up to date and that you make an offer to pay the tax by instalments. (HMRC’s right to legally take possession of goods without a court order does not apply in Scotland – HMRC needs to apply to the Sheriff Court before enforcing a debt).

2)      HMRC is unlikely to accept an offer which takes more than 12 months. If you have significant assets and are not in a position to offer repayment in no more than 12 months you should take advice as soon as possible.

3)      Only the Enforcement and Insolvency Service (EIS) of HMRC (based in Edinburgh) can take bankruptcy action. If you have received a letter from another office threatening bankruptcy, there is likely to be a delay while the file is transferred to EIS.

4)      Before you can be made bankrupt, you must be served with a statutory demand. This formal request for payment requires settlement of the debt within 21 days. Only at the expiry of this time can HMRC petition for your bankruptcy.

5)       It is always worth negotiating with HMRC.

6)      The court can decide to adjourn a bankruptcy hearing, if the judge considers you should be given more time to arrange payment. Whatever the stage, it is best to take advice as soon as possible.


Special rules for older people, and those with mental health problems or long-term ill-health

HMRC will take into account your age, long-term physical ill-health and mental ill-health when considering how debt recovery should proceed.

HMRC should take mental health into account when considering enforcement action.  This is considered in details in the HMRC guidance at

For elderly and seriously  ill, there is guidance at

You can also look at the  section on remission in our Tax Debt Guide (as above).