Can You Write Off HMRC Debts?

In this article we explore the topic of whether you can write off HMRC debts.

If you owe money to the HMRC, you should pay it as soon as possible. This is considered a high-priority debt, and not resolving it may result in legal action or bailiff visits. If you’re unable to settle your taxes with HMRC.

Are You Struggling With Tax Debt?

The HMRC (Her Majesty’s Revenue and Customs) is the government department in charge of income tax, national insurance, VAT arrears, and tax credit. These costs are classified as high priority and therefore, unlike certain debts, must be paid as soon as possible.

Otherwise, the consequences might be devastating – possibly including fines or bailiffs. Fortunately, assistance is available. We have a proven track record of dealing with HMRC debt and can assist you in resolving your financial issues.

However, if you wish to agree the HMRC arrears, there are a few things to bear in mind:

Managing your debt with HMRC

Is HMRC right?

It’s tempting to believe that a large government agency like HMRC is always correct 100 percent of the time. This isn’t the case, however. From misdelivered mail to incorrect calculations, the organization isn’t flawless.

As a result, double-check any repayment claims to ensure they are correct. If you believe a mistake has been made, contact HMRC and ask them to confirm their calculations.

Therefore, it’s conceivable that your tax debts are the result of a simple mistake.

Confirm Your Financial Situation With HMRC

If a demand for repayment is correct, you should budget carefully to see whether the debt may be paid. This might either suggest that reductions must be made or simply what you can afford to pay HMRC.

You may be bale to negotiate changes to your payments if you budget first. This is completely at HMRC’s discretion.

Don’t Ignore HMRC

The worst thing you can do if you’re behind on HMRC payments is to ignore them. It’s critical that you keep them updated on your efforts to pay off debt. If you hire us to assist you, informing the business that we’ll be working with them should swiftly and effectively resolve the problem and prevent them from sending demands for repayment.

Consequences For Not Paying HMRC

Non-payment to HMRC may have severe consequences. For example, the company may use direct recovery, bailiff intervention, legal action, and beginning bankruptcy procedures to pursue payment..

What Is A Direct Debt Recovery?

If you fail to pay your taxes, HMRC may take money directly from your bank or building society account. Fortunately, they won’t do it right away; instead, you’ll be informed when (or if) they intend to do so..

Methods Of Recovery For HMRC Debt

HMRC may retrieve overpayments under the TCA 2002, Section 29(3) to (5), in one of three ways, as previously mentioned:

Through amending the PAYE tax code.
By deduction from any tax credit award made to the claimants (referred to as ‘ongoing’ recovery)
By direct recovery

DWP has also been given the authority to recoup tax credits debt under its existing powers of recovery since April 2015. DWP can also use Direct Earnings Attachment (DEA) to recover money from an employee’s wages, which it may do in addition to similar powers wielded by HMRC.

This implies that tax credit debts will be repaid from UC payouts to those who qualify for the program. These powers will also be implemented from April 2018 to allow DWP to collect tax credit debt on behalf of HMRC from individuals whose claims have concluded but who have not switched over to UC.

This began to happen procedurally in October 2018. You may learn more about this in our DWP and tax credit debt section below.

It should be noted that claimants are not permitted to select between “ongoing” and “direct” recovery. The claimant’s claim circumstances determine the method of recovery used..

If the overpayment was caused by a claim that is still in payment, HMRC will utilize ongoing recovery. If the claim has ended or if the claim is a “nil” award (entitlement exists but no payments are due as income is too high), HMRC will pass on the debt to their Debt Management (DM) arm for collection.

In October 2014, HMRC implemented new IT to allow “cross claim” recovery, allowing overpayments on a claim that has concluded to be recovered from a subsequent new claim even if it is in a different role (for example, an overpayment on an old single claim can be recouped against a new claim as a couple). Below you’ll find a detailed explanation of how cross claim recovery works..

Overpayments of income tax credits can also be recouped by DWP using the same methods it uses to collect its own debts, as can underpayments of Universal Credit. We go through how DWP recovers tax credit debt on a separate page.

Does HMRC Use Debt Collectors?

The HMRC can (and does) employ private debt collection firms to collect arrears. This might lead to bailiff involvement, in which your belongings may be taken to pay HMRC.

What Legal Action Can I Expect?

If you don’t pay your taxes in the UK, HMRC may take you to court to get back money. In this case, you will have to repay what you owe as well as cover the court’s fees.

Does Bankruptcy Clear HMRC Debt?

If you are unable to pay HMRC, the organization has the legal right to petition for your bankruptcy. Although bankruptcy will wipe out your debts, your assets will be sold by court order in order for HMRC to get as much of the debt as feasible.

How Long Can HMRC Chase A Debt?

If HMRC investigates your finances, they may try to collect a debt that is more than 20 years old. The usual duration for an inquiry is four months. As a result, if you want HMRC to forget about your outstanding obligations -they won’t.

Can You Get HMRC Debts Written Off?

Through a debt solution like an IVA, it is possible to have HMRC debts erased. However, this must be approved by the business. As a result, you should be in a position where the answer reimburses HMRC more money than they would have earned through bankruptcy.

Why You Must Pay HMRC As Soon As Possible

Failing to pay HMRC may have severe consequences. However, in all likelihood you are already aware of this. In an ideal world, you would be able to send money to HMRC, but we all know that’s not always the case.

The good news is that we can assist you. We are seasoned in resolving HMRC debts, which allows us to provide the assistance you require. Get in touch with us now by completing the simple application form below and we’ll be able to come up with a solution that meets your needs.

HMRC guidance

HMRC released a comprehensive guide for intermediaries, called ‘How HMRC Deal with Tax Credit Overpayments,’ in 2011. This document was extremely useful in outlining the procedure that HMRC went through to recover outstanding debts. This was discontinued in 2014 and there is now very little information available to consultants in this area.

We also recommend that advertisers use the archived version of the guidelines to negotiate with Debt Management while they wait for the new versions to become available.

Recovery of old tax credit debts

Claimants may call you with ancient tax credit debts, and they will often claim that HMRC has not contacted them for many years. It’s not unusual for bills to be more than 10 years old.

In England and Wales, the Limitation Act 1980 applies to tax credit obligations under theory. There is some debate about this because the Act does not apply to tax debts. This is verified in HMRC’s DM handbook. The six-year limit for recovery action under the Act begins when a debt is payable. HMRC may not take County Court action in most cases, but it does not prevent recovery from ongoing benefit awards or the debt being passed to DWP for recovery (either via universal credit or separately).

The law on whether this six-year rule applies is intricate, and you should get legal and/or debt advice.

In Scotland and Northern Ireland, the guidelines are different.