HMRC Debt Collection Process Explained – Do You Have to Pay?
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It can sometimes seem like everyone wants to take money off you. Whether it’s paying back your credit card, your mortgage, or your taxes, there’s an endless stream of payments you need to make. Yet sometimes all of these payments can get on top of you. You might fall behind on your debt, or take too much in benefits. In some circumstances, you might end up with HMRC debt. We take a look at what the HMCR debt collection process is, as well as some frequently asked questions about it.
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Beating Debt Collectors
There are several ways to deal with HMRC debt collectors and improve your finances.
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What is HMRC Debt?
HM Revenue and Customs (HMRC) is the part of the UK government that’s responsible for collecting taxes and paying support. If you end up with HMRC debt, it’s likely that you’ve either underpaid your taxes or over-claimed for things like tax credits. Usually, your tax debt will come if you haven’t paid your tax bill in full or on time.
Can I get support with debts?
One of the good things about the HMRC debt collection process is that the organisation is a lot more understanding than many. As such, they’ll often tailor support to individual cases. If you’re struggling to pay your debt to HMRC, you can try and agree a Time to Pay plan, which helps you gradually pay back what you owe. Each one of these plans is based on your current situation, ensuring you can still live while paying your debt.
Is extra help available?
Of course, in some cases, you might need a little bit of extra help when it comes to dealing with your debts. In such a case, you’ll find that HMRC debt management staff are all trained to know when you might need extra help. You can also nominate someone you know and trust to deal with your tax affairs if you are unsure.
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Where can I get debt advice?
There are several places you can turn to if you’re struggling with your debts, HMRC or otherwise. For a start, you can check out our debt options article. You can also contact debt charities like StepChange and National Debtline for advice. If you want to speak to someone on the phone or in-person, Citizens Advice is there to help you.
HMRC debt collection process
Now that we’ve answered some of the frequently asked questions about HMRC, it’s time to look at the debt collection process in more detail. It’s worth knowing the steps that the government take to reclaim what you owe. Doing so can help you identify how far along the process you are, allowing you to take the appropriate action.
Phone and mail
The first thing that will happen when you have debt with HMRC is that they’ll try and get in touch with you. They’ll either write you a letter, call your phone, or send you an SMS text message. They’ll usually be fairly persistent when it comes to this stage, as they generally solve most issues by doing so.
It’s a good idea to respond to these attempts, as often, HMRC will be able to come up with a repayment plan that fits your current financial situation. However, if you ignore them, things will start to escalate fairly quickly.
If you don’t respond to their calls or letters, it’s likely that HMRC will try and visit you at your home or business address. This may take you by surprise, although sometimes, they’ll notify you of their visit. Generally, if they visit you in person, they’ll still try and help you come up with a repayment plan. They’ll offer you as much support as possible when it comes to repaying your debt.
Debt collection agencies
In some cases, HMRC will appoint debt collection agencies to help chase missing payments. However, they only use these for around 5% of HMRC debts each year. What’s more, they’ll only use debt collection agencies for desk-based recovery. So, you might get calls or letters from a debt collector acting on behalf of HMRC, but that’s about it.
Unlike many debt collection agencies, HMRC has enforcement powers available to them if the previous methods don’t work. As such, they can come to your house and take your belongings to sell in order to cover the cost of your debt. They’ll always give you warning of this happening, as well as the chance for you to pay.
As well as taking your possessions, they can also charge you for doing so, as well as for the cost of selling them. However, you usually get seven days after they seize your belongings before they sell them, giving you time to arrange payment of your debts. There are also some restrictions on what they can and can’t take.
Direct from your bank
HMRC can take money directly from either your bank or building society account. If you owe more than £1,000 and have enough funds in your account to cover your debt and living costs, they will take the money directly from you. This is known as a Direct Recovery of Debt. Of course, they will never leave you without enough to live on, but it can be an unpleasant experience nonetheless.
Count Court proceedings
If the previous methods still haven’t worked, HMRC will start County Court proceedings against you. There are various approaches they can take here, including:
- Charging orders. This means that any assets you sell must be used to pay your debts. It also gives HMRC the power to recover debts from property sales.
- Attachment of Earnings. With this method, HMRC will take money directly from your paycheque each month to repay your debt.
- Third Party Debt Order. If someone owes you money, HMRC can reclaim the debt from this third party.
- Pensions. In some circumstances, pension payments may be considered an income. As such, HMRC could recover money from your pension payments.
There are other methods they might use too, although these are usually only for the most extreme cases. Things like insolvency or voluntary arrangements can sometimes be used.