HMRC clarifies Time to Pay rules for settling tax debts

HMRC has issued a briefing explaining the process for individuals and businesses if they have problems paying outstanding tax bills, some of whom may be eligible to restructure tax debt under the 'Time to Pay' scheme.

The taxman says that those facing financial difficulties, which could be a result of business setbacks or a life event that temporarily affects their ability to meet their financial commitments, should inform HMRC immediately as they may be eligible for a 'Time to Pay' arrangement.

Time to Pay is an agreement between HMRC and a taxpayer that allows fixed repayments of a tax debt to be made over an agreed period and can be considered for all types of tax debt. To ensure that it can recover all payments due in full, HMRC will consider certain criteria, including the taxpayer's previous payment history and their plan for repayment, before agreeing to this arrangement.

However, HMRC stresses that Time to Pay is not an automatic right and should ideally be sought before a debt becomes due, although a possible arrangement can still be considered after a due date. Penalties can be avoided if a Time to Pay arrangement is agreed before the due date.

Once in place, the arrangement will be monitored and if it is not kept, HMRC may resort to other options, such as enforcement action, to collect the debt.

HMRC warns that those who do not pay and will not talk to HMRC could face late payment penalties and interest charges that can continue to accumulate on their debt until it is paid.

In addition, from April 2014, fees will be charged whenever HMRC takes enforcement action, which could increase the size of the debt even further 

HMC can also remove personal or business possessions to be auctioned, take court action, or star insolvency proceedings.

The HMRC briefing is available HERE

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