HMRC debt collection: checking a demand and payment options

Dealing with an unexpected letter from HMRC debt collectors can be a bit scary. But don’t worry, we’re here to help.

Check a demand against your tax account and verified HMRC contact details before paying or sharing information.

In this easy-to-read guide, we’ll explain: 

•  What HMRC debt is and how the collection process works.
•  How to check if your HMRC debt is real.
•  Ways to get help if you can’t afford to pay.
•  What a Time to Pay Arrangement is.
•  Other solutions for dealing with debt.

We understand that dealing with HMRC debt can be hard. We have lots of information to help you make the best choices. 

Ready to learn more about how to handle your HMRC debt? Let’s get started.

What is HMRC?

HM Revenue and Customs (HMRC) is the part of the UK government that’s responsible for collecting taxes and paying benefits.

If you end up with HMRC debt, you’ve likely either underpaid your taxes or over-claimed for things like tax credits.

How to Dispute

HMRC sends you a ‘decision letter’ letting you know whether you can appeal a tax decision.

It’s worth noting there’s a procedure to follow when appealing HMRC Debt.

You could appeal against:

• A tax bill which includes Income Tax, VAT, Corporation Tax
• Claims for tax relief
• A request for details or to check through your business records
• A penalty you received for late tax payments or late tax return submission

An appeal can be made by an accountant or someone else who manages your taxes. This can be helpful as understanding Tax Codes is important.

The appeal route, deadline and payment position depend on the decision. Do not assume that every appeal requires a fee or automatically postpones payment; representation may have costs, and postponement may need a separate request. See related guidance.

» TAKE ACTION NOW: Fill out the short debt form

Consequences of ignoring it

The consequences of ignoring an HMRC debt could lead to more stress and anxiety.

I’ve listed what may happen here:

• HMRC may use an applicable power to take control of goods or other enforcement procedure; this is not an automatic first step for every debt.
• An application for a County Court Judgement (CCJ) could be made against you
• A summons to appear in a magistrates’ court could be issued
• Bankruptcy proceedings could be started against you
• Money could be taken directly from your wages
• Money could be taken from your savings

What other debt solutions are there?

If you can’t afford to pay what’s owed, seek advice from a debt expert.

Tax arrears need specialist assessment. Some liabilities can be included in an appropriate formal debt solution, while exclusions, approval requirements and jurisdiction matter.

Formal solutions are legal processes which include:

• A Debt Relief Order (DRO)
• An Individual Voluntary Arrangement (IVA)
• Bankruptcy

An informal payment arrangement can spread a valid balance, subject to agreement. A new consolidation loan is a separate credit contract, not merely a non-binding arrangement with existing creditors.

An informal arrangement does not give the same statutory protection as insolvency. New borrowing remains subject to its own binding terms and may increase total costs.

Informal solutions are:

• A consolidation loan is new borrowing; compare the total cost and any security risk before considering it for tax arrears.
• A debt management plan (DMP)
• Paying each creditor individually but with payment plans

Is extra help available?

Of course, in some cases, you might need extra help when it comes to dealing with your debts.

Tell HMRC if you need extra support because of health, disability, bereavement or another difficulty, and ask for an appropriate contact method. See related guidance.

You can also nominate someone you know and trust to deal with your tax affairs if you are unsure. 

What is a Time to Pay Arrangement?

A Time to Pay arrangement spreads an agreed HMRC balance into instalments after an affordability assessment. It is not universally limited to twelve months. See related guidance.

The duration and terms depend on your circumstances and the debt. Interest or penalties may still apply; check the written arrangement and tell HMRC if you cannot keep to it.

Who can help with tax arrears?

A qualified tax adviser or accountant can help check liability, returns and appeals. A debt adviser can help assess affordability and debt options.

Self-employed people may also need business-debt advice. Check the adviser’s relevant expertise, fees and authority to deal with HMRC.

Different advisers have different roles:

• An independent financial adviser normally advises on financial products and planning; the title alone does not establish expertise in tax-debt disputes or insolvency. See related guidance.
• For a regulated product recommendation, check the adviser’s permissions and scope. For debt or tax work, seek the appropriate specialist rather than assuming any financial adviser covers it.

Case study

See the message a person posted on a popular online forum.

Source: Moneysavingexpert

Other Debt Collectors 

You should check for more outstanding debts that you may have with other companies or debt collectors. Here are four steps you could take: 

1. Check your credit report for other defaults 
2. Check your email and post for reminders or overdue notices
3. Check the court records for CCJs against you
4. Check your bank statements for the names of other debt collectors 

There are hundreds of debt collectors in the UK and each works with different companies to collect debts.

Some debt collection businesses act for creditors; others purchase debts. Check the letter and ask who owns the debt and how the balance was calculated.

If you see a name on your bank statement that you don’t recognise then you can search MoneyNerd to see if they’re a debt collector. 

HMRC Contact Details

Post	Use the HMRC postal address specified for the relevant tax and issue on GOV.UK or a verified current notice; there is no universal address for every tax-debt query.
Telephone	Use the HMRC contact route for the relevant tax and payment problem on GOV.UK; a general Income Tax number is not a universal debt helpline.
Accessibility	Ask the relevant HMRC team about Relay UK and extra support using its current official contact information.
Official app:	official HMRC app
Website:	https://www.gov.uk/government/organisations/hm-revenue-customs
Debt collectors	Check the current GOV.UK list of agencies used by HMRC. Its external collection agencies contact by letter, text or phone and do not make home or workplace visits on HMRC’s behalf.

County Court proceedings

HMRC can choose from different statutory and court-enforcement routes depending on the debt and jurisdiction. County Court proceedings are not inevitable or always required before another recovery power is used.

There are various approaches they can take, including: 

• A charging order can secure a judgment against an eligible interest in specified property or assets. It does not apply to every asset sale or itself force the sale of a home. See related guidance.
• Deductions from earnings or collection through a tax code depend on the relevant legal power and conditions; they are not a power of an ordinary external collector. See related guidance.
• A third-party debt order is a court-enforcement procedure concerning money owed to the debtor, which may include qualifying bank funds. HMRC also has separate direct-recovery powers with statutory safeguards. See related guidance.
• Some recovery can affect taxable pension income through the tax code where the rules permit. Do not assume HMRC can simply seize an entire pension fund. See related guidance.

The proper response depends on the actual notice, tax and enforcement route. Seek advice promptly instead of relying on a fixed sequence.

Insolvency and voluntary arrangements have eligibility, approval and other consequences. They should be assessed with a qualified adviser and do not automatically write off every HMRC liability.