You need time to pay
Problems paying your tax? guide
Seeking time to pay
If you can’t afford to pay your tax bill in one go, HMRC may agree to payment by instalments. Sometimes you may be contacted by a Debt Collection Agency on behalf of HMRC. You should check that the agency is genuine by comparing it to the list on the Gov.uk website.
Debt Collection Agencies have broadly the same powers as HMRC to agree time to pay of up to 12 months. But they are not tax experts, and may not understand how the debt has arisen. Any queries about the amount should be raised with HMRC.
Debt Collection Agencies are authorised to contact taxpayers by phone and letter; they are not authorised to carry out personal visits. If the Debt Collection Agency fails to reach an agreement with a taxpayer they will refer the case back to HMRC to consider further enforcement action. Sometimes HMRC asks Debt Collection Agencies to collect only part of a debt; this means that the amount being pursued may not be the total amount due.
Make sure that you consider all the issues such as filing all your tax returns, penalty appeals, estimated demands, and payments on account, as described in the earlier sections of this guide.
Although tax should normally be paid when it falls due, DM may allow you to pay your tax over a period of weeks or months. Only in exceptional circumstances will HMRC consider giving you more than 12 months.
Interest will be added, although the amount involved may be small. Unlike some creditors, HM Revenue and Customs has no discretion over the amount of interest charged. It cannot “freeze” the interest to help you to clear the debt.
If you try to seek an agreement, DM will want to know why you can’t pay the debt immediately and in full. Normally you will make contact with DMB by phone. You may be asked a lot of personal questions. For example, DM may want to know what other members of your family earn, or what you spend on clothes or holidays.
From your point of view, the reason for having these discussions is to try to avoid HMRC enforcement action. You can choose not to discuss matters, but this may increase the risk of enforcement action. DM may feel that they have no other way of collecting the debt.
Depending on your circumstances you might ask DM for:
• a payment arrangement
• suspension of collection action for a period
• waiver of the tax
If you live in Scotland, you may wish to consider the Debt Arrangement Scheme. Under this Statutory scheme, you can be protected from action by creditors in return for agreeing to a plan to repay your debts in full over an agreed timescale. For more details see Debt Arrangement Scheme website.
DM’s approach is to separate taxpayers into two categories, the “can’t pay” and the “won’t pay”. Taxpayers who make no attempt to contact DM are treated by default as people who “won’t pay”. Individuals who come to Voluntary and Community Sector organizations for advice are normally treated as genuine “can’t pay” cases, once contact with DM has been made.
Most agreements involve making a payment arrangement. Typically you offer to pay a certain amount each week or month, until the tax plus interest is cleared. Taxpayers with a good compliance record – those who have previously paid their tax on time and kept their returns up to date – can make a good case for an arrangement that suits their current circumstances. Normally HMRC will want to be paid by direct debit.
“Can’t pay” taxpayers who want a payment arrangement will be expected to:
• complete all outstanding tax returns very quickly
• pay the arrears of tax, plus interest, and any penalties over the period of the arrangement
• show that they can provide for on-going tax bills that will arise during that period
The maximum timescale allowed for doing this will normally be 12 months. Time to pay of over 12 months will only be permitted in exceptional circumstances. VAT or PAYE from an employer are normally collected on a shorter timescale. In practice DM normally wants the money paid much quicker than this.
Even with a time-to-pay agreement in place, interest will still be charged on any overdue tax.
If you feel under pressure to pay a bill which you think is incorrect, or one which includes a “determination” (an estimated bill), then you should seek advice. You may need to make a provisional agreement with HMRC to pay some of the tax bill, while the correct amount is worked out.
As HMRC statements of account normally cover only transactions since the last statement, it can be difficult to work out what you owe and why. You can ask for a full statement of account from DM to list exactly how the bill is made up. If you are registered for self assessment on-line, or have a Digital Tax Account, you may be able to find out more about your tax bill through the on-line system.
DM will require details of savings and assets plus full income and expenditure information before an extended time to pay agreement is accepted. Short-term time to pay agreements of a few months duration only, may be agreed with less detailed information.
DM prefer this information to be given by phone during the initial contact if possible. Your expenses will be reviewed by the Debt Management officer and any which are thought to be unusual, large or exceptional may be challenged. It is well worth taking advice to help prepare these figures. If you are unsure about the answer to a question from DMB, do not guess. Instead, say that you are unsure of the answer and will give more details once you have checked up.
Agreeing a payment plan
You will need to agree a payment plan with DM. This plan must cover not only the tax currently outstanding, but also any future tax liabilities as they arise during the period of the plan. This would include “payments on account” in January and July if you are self-employed.
HMRC generally expect future tax payments to be paid as they arise, alongside the ongoing payment to clear the arrears.
You are more likely to receive a sympathetic response if there are exceptional, unforeseen reasons why you can’t pay, such as a sudden illness, or the insolvency of a major customer.
HMRC may refuse requests for a payment plan, if it appears that such requests are being made routinely, year after year.
Tip: If you have not yet fallen behind with your tax payments, but expect to receive a demand in the near future which you will be unable to pay, contact HMRC’s Business Payment Support Service(BPSS) on 0300 200 3835.
The BPSS can agree a payment arrangement in advance, which may be easier than negotiating with DM after a demand is received. For more information see https://www.gov.uk/government/organisations/hm-revenue-customs/contact/business-payment-support-service.
If your request is accepted
If DM, or a debt collection agency appointed by HMRC, agrees to your request for time to pay, you should receive confirmation of this in writing. If you receive a verbal agreement at a meeting or on the telephone, ask for it to be confirmed in writing. If not, there could be difficulties later if there is a dispute over exactly what was agreed.
Having an agreed payment plan in place will mean that you avoid further late payment penalties.
If Debt Management rejects your proposal
DM has a duty to consider your proposal, but there is no automatic right to time to pay. If you believe that it has been rejected out of hand, without being properly considered, you can make a complaint and ask for your proposal to be referred to a more senior official and for a full response in writing.
If you fail to get agreement you should still pay what you can, when you can; unless, for example, it appears that bankruptcy might be inevitable – in which case you should seek debt advice as soon as possible.
If you fail to agree a payment plan with DM, then recovery action is likely to be taken. Recovery action may include legally taking control of goods, removal of funds from your bank account (called Direct Recovery of Debt – England, Wales and Northern Ireland), court action in the Magistrates’ Court or County Court, or Bankruptcy proceedings.
Other points on time to pay
DM is most unlikely to accept a lump sum of less than the tax due in full settlement. But an offer of a lump sum may help to persuade DM to accept the rest of the tax over a longer period of time.
For example, Julian owes £2,000 in tax but has no money or other assets. He is working on a low income. His offer to repay the money at £50 a month has been turned down. He does not want to face enforcement action. He tells Debt Management that his mother will give £1,000 towards settling the debt if HMRC will agree to write off the rest. Debt Management is unlikely to agree to this, even though HMRC would be unlikely to more through enforcement action.
If instead, Julian offers the money from his mother as part of an overall agreement, HMRC might be willing to consider a longer repayment period for the remaining money. £1,000 now with the balance at £50 a month is an option which HMRC might consider – though everything will depend on the exact circumstances.
Only offer what you can afford
When making a proposal, be careful not to offer more than you can afford. If you fall behind with an agreed schedule of payments, HMRC may end the agreement. Sometimes HMRC will only agree further time to pay if they also have a court order against you.
If you know in advance that you are likely to miss an instalment, contact HMRC at once and try to negotiate an extension.
Short delays while you sell an asset
If you are requesting a short delay, for example to allow you to raise funds by selling a property, or your business, DMB may agree to grant the extra time.
Reducing payments on account (where tax bill lower than last year).
Often your tax demand will include “payments on account”. These are due on 31 January and 31 July, and are based on the previous year’s tax bill. If you think that your tax bill this year will be lower than the previous year, you can “claim to reduce the payments on account”. This can be done on-line if you are registered for self assessment on-line, or by phone 0300 200 3310. Alternatively you may download and send in form SA303.
Suspension of collection action for a period
DM may agree to suspend payment demands for a period if you are temporarily unable to pay the tax. This might because you are unemployed or have short-term business problems or are ill.
Typically, such an agreement may last for three or six months, with a review of your circumstances at the end of that period.
Waiver of tax
Very occasionally HMRC decides not to pursue payment of a tax bill. This is sometimes known as remission. The tax is not permanently written off, but you will not receive further demands unless your circumstances improve unexpectedly.
Remission is most common in the case of a person who is elderly, sick or long-term unemployed, and has no assets and lives in rented accommodation. If you think you might be eligible for remission, you should seek further professional advice on to how to put your case to DM. See https://taxaid.org.uk/guides/taxpayers.
Freezing of interest
HM Revenue and Customs cannot agree to “freeze” interest on the tax, so as to help you to clear the debt. HMRC is obliged by law to charge interest.
- Debt Management and Banking department of HMRC
- estimated bill sent by HMRC when they have not received your tax return.
- Pay As You Earn. The term here refers to the accummulated income tax and National Insurance Contributions deducted from employees' wages which should be paid to HMRC each month.