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How long can HMRC chase a debt?

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Scott Nelson

Managing Director

MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

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Janine
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Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

Learn more about Janine
· Feb 7th, 2024
Could you legally write off some debt? Answer below to get started.

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This isn’t a full fact find, MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

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For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

Have you got a letter from a debt collector about a debt from HMRC? You’re in the right place. Each month, over 170,000 people visit our website to get guidance on this very topic.

This article will help you understand:

  •  How long HMRC can chase a debt
  •  How to deal with HMRC debt collectors
  •  How to know if you owe HMRC money
  •  If you can write off some HMRC debt
  •  How to contact HMRC about tax debts you owe

We know that getting a letter about a debt can be a surprise, or even scary, as nearly half of individuals who deal with debt collection agencies have experienced harassment or aggression1. You may be worried about where the debt came from, or you might question if you should pay this debt.

But rest assured, we’re here to help. We have lots of useful advice and information to help you understand and manage this situation.

Could you legally write off some debt?

There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt, but the wrong one may be expensive and drawn out.

Answer below to get started.

How much debt do you have?

This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

How Will I Know I Owe HMRC Money?

The HMRC will let you know you owe them money by writing to you. You may also receive phone calls or even text messages, depending on the contact information they have for your account. If you fail to contact the HMRC the letters will continue. Furthermore, as time passes, you may hear a knock on the door.

The HMRC will inform you if they intend to call at your home or place of business. However, it might come as a surprise if you miss this communication. I recommend you open all letters from the HMRC to prevent an unexpected visit.

Janine, our financial expert, explained that while debt collectors can visit your home for payments, they cannot come to your workplace, act threateningly, force payment, or discuss your finances with others. If they violate these rules, you can complain.

A Letter from Debt Collectors about an HMRC Debt

The HMRC can pass on your account to debt collectors If attempts at contacting you fail. This is uncommon and only used for desk-based recovery. The debt collectors will make contact using letters or phone calls. You can avoid debt collectors by contacting the HMRC directly.

Research has found that the average unsecured debt amount has increased by 27% year-on-year (to £16,174)2, so I strongly recommend contacting HMRC to discuss the debt, as ignoring the problem won’t make it go away.

How Many Years Can I Be Legally Chased for An HMRC Debt?

Some debts become statute-barred after 6 years. I go into these types of debts in greater detail in my Statute Barred Debt, All You Need to Know article. However, the HMRC is different, and some will never become statute barred. You can legally be chased for longer if you owe money to HM Revenue and Customs.

Wondering what you can do if you’ve been contacted about an HMRC debt? The first thing to do is start acting as soon as possible. Ignoring the debt won’t make it magically disappear. Ignoring the problem will only make things worse and can have major implications.

How a debt solution could help

Some debt solutions can:

  1. Stop nasty calls from creditors
  2. Freeze interest and charges
  3. Reduce your monthly payments

A few debt solutions can even result in writing off some of your debt.

Here’s an example:


Situation

Monthly income £2,504
Monthly expenses £2,345
Total debt £32,049

Monthly debt repayments

Before £587
After £158

£429 reduction in monthly payments

If you want to learn what debt solutions are available to you, click the button below to get started.

Get Started

How Long Can HMRC Chase a Debt for Tax Credits?

Wondering how long can HMRC chase a debt for tax credits? While some investigations can take place up to 20 years later, four years is the standard time limit for tax credit debt. However, it is important to know that while four years is the standard time the HMRC can chase tax credit debt, there is no formal time limit. So, the HMRC can chase a tax credit debt for many years should you fail to repay it.

Tax debt recovery

HMRC may be contacted by claimants who claim to have outstanding tax debts that date back decades. Debts that have been outstanding for a decade or more are not uncommon.

The Limitation Act 1980 in England and Wales is supposed to apply to tax credit debts. There is some ambiguity here because the Act does not apply to tax debts. The HMRC DM manual confirms this. The Act stipulates that debt recovery actions must be initiated within six years of the debt becoming payable.

Since HMRC can’t take County Court action in the majority of cases, the debt is transferred to DWP for collection rather than being collected from ongoing benefits (either via universal credit or separately).

The six-year rule is complicated, and legal and/or debt experts should be consulted before making a decision.

Scotland and Northern Ireland have their own set of rules.

» TAKE ACTION NOW: Fill out the short debt form

Can My Tax Credit Debt Become Statute Barred?

The Limitations Act 1980 prevents old debts from taking you to court for certain types of creditors. They can include debts such as loans, credit cards, and even repayment arrears. While tax credits can be included, it is highly unlikely for an HMRC debt to become statute-barred. That doesn’t mean it’s not possible. I have more information on statue barred DWP debts available to read if you’d like to learn more.

The HMRC Can Take Your Belongings

Debt collectors don’t have enforcement powers, but the HMRC does. They can come to your home to take your belongings. The money raised from the sale of your belongings will go towards clearing the debt that you owe them. Taking your possessions also increases the amount of money you owe to the HMRC. They will charge you for the costs involved in seizing and selling your goods.

The HMRC will give you notice if they’re due to arrive and take your possessions. You will still have time to clear the debt providing you contact them and arrange a repayment plan. Please read my article about how to deal with bailiffs if you fail to come up with a repayment plan or are concerned about dealing with bailiffs.

It’s very important that you know the differences between debt collectors and bailiffs, as the latter have more power than the former. Here’s a quick table summarizing what each can and can’t do.

Category Debt Collectors Bailiffs
Bank Account Access Access your bank account – but only after a CCJ has been secured and not complied with.
After the creditor has taken you to court over missed payments, bailiffs/creditors can apply for a third-party debt order to freeze and take control of a bank account.
Leniency Negotiate a debt settlement. Tip: make sure to get this new arrangement in writing. If you tell them immediately that you are a vulnerable person, they must treat you with greater consideration and give you more time to respond to any contact.
Re-Selling Debt Sell your debt if they are unable to collect payment from you. Call and visit multiple times – there isn’t a set limit on how often they may contact you. If they can’t take any goods to sell or enter your property, they might return with a warrant and force entry to your property.
Visiting Your Home Conduct home visits (on rare occasions) and knock on your door. Conduct home visits and can enter without your permission as long as all of the correct legal steps have been taken.
Contact Hours Contact you by phone or mail. They’re allowed to call whenever they see reasonable without constituting harassment, usually between 8 am and 9 pm. Can visit your home anytime between 6 am and 9 pm (unless they have a court order that states otherwise).
Permission To Take Belongings They cannot take anything from your home. They may only ask you to make a payment. Take goods from inside and outside of your home once all legal steps have been taken. However, they cannot take essential items for domestic living or work purposes.
Court Actions Threaten to take you to court by suing you for payment on a debt. Can apply to the court to get permission to use ‘reasonable force’ to enter a home, which could mean breaking in. They have to give details to the court about how they will secure the property afterwards.

What is HMRC Direct Recovery?

One of the options the HMRC (Her Majesty’s Revenue and Customs) can use to recover the debt is known as Direct Recovery. This allows them to take money directly from your account or benefits. The HMRC can use this option regardless of how long the HMRC has chased the debt, depending on the type of debt it is.

Direct Recovery is used if you owe the HMRC more than £1000, providing you have enough money in your bank to clear the debt. The HMRC needs to ensure you have enough funds available to live on when using the Direct Recovery option. Therefore, there’s no need to worry about not having enough money left to live on.

What happens if I have outstanding tax credit debts with an ex-partner?

According to the law, a tax credit overpayment debt for a couple can be collected in full (and only once!) by HMRC from either the claimant or their partner.

In situations where this has occurred as a result of the breakdown of a household, the HMRC has made it clear that it will send letters to both members of the separating couple (making every effort to trace any former partner for whom they do not have an up-to-date address).

Depending on the circumstances of the claimant and their ex-partner, HMRC may ask each of them to pay a different amount or require one of them to pay the entire amount if they believe there should be a discrepancy in the amounts due. Alternatively, they can come to an agreement and notify HMRC of their decision to pay a different amount jointly and severally rather than individually.

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How Long Can DWP Chase a tax credits debt?

Six years is the typical time frame that the Department of Work and Pensions (DWP) has to collect on debts owed to it. You have the right to file a defence if the Department of Work and Pensions (DWP) attempts to bring a county court claim against you for an overpayment of benefits and you believe the tax credit overpayments occurred more than six years ago.

But if you plan to do so, you should seek legal advice.

As there is no need to go to court, a direct earnings attachment can be used to get back overpaid benefits at any time, even after the debts have been written off.

If you don’t pay HMRC the debt you owe, it might get passed on to the DWP. The usual length of time the DWP can chase a debt is six years. The DWP can use enforcement action to ensure the debt is repaid. This repayment is taken directly from your benefits or wages.

A change made to your tax code will ensure the money owed is recovered. The DWP may even send bailiffs to your home to recover your possessions that can be used to raise the money needed to recover the debt if it goes unpaid.

Paying Back Your HMRC Debt

After discovering how long the HMRC can chase a debt, you may now wish to repay them sooner rather than later. The good news is that the HMRC will be open to discussing an affordable repayment plan. You could contact a debt advisor to assist you in working out your financial budget.

Alternatively, use my simple budgeting tool that will help you get a good grasp on your incomings and expenditure. It’s free and quick to download and use. You now have the answer to the question ‘how long can HMRC chase a debt.’

Please check out the articles I’ve linked below if you have further questions regarding your specific debt and the options you have available to you regarding repayment. Alternatively, learn more about debt solutions such as an IVA or bankruptcy.

HMRC Contact Details

Post: Pay As You Earn and Self Assessment
HM Revenue and Customs, BX9 1AS, United Kingdom
Phone: 0300 200 3300
+44 135 535 9022 outside UK
Relay UK: dial 18001 then 0300 200 3300.
Official app: official HMRC app
Website: https://www.gov.uk/government/organisations/hm-revenue-customs
Could you legally write off some debt?

Answer below to get started.

How much debt do you have?

This isn’t a full fact find, MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

References

  1. InDebted, Debt Collectors Survey
  2. StepChange, Scotland in the Red
The authors
Scott Nelson Profile Picture
Author
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh Profile Picture
Debt Expert
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.
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