Policy paper

Collecting tax debts as we emerge from coronavirus (COVID-19)

Published 30 June 2021

Protecting livelihoods and keeping people in work remains the government’s priority, as it has been throughout the pandemic. HMRC has been central to delivering on this, for example by pausing many of our debt collection activities and delivering support packages like the Coronavirus Job Retention Scheme and Self Employment Income Support Scheme.

We know that many of our customers – individuals and businesses alike – have been affected by COVID-19, and as a result, some face uncertain financial circumstances in the months ahead. We also understand that many customers are worried as the financial support schemes start to wind down, and we want to offer practical support wherever we can.

As the UK emerges from the pandemic and economic activity resumes, we are restarting our debt collection work and will be contacting customers who have fallen behind with their tax during this difficult time. At all times, we will take an understanding and supportive approach to dealing with those who have tax debts or are concerned about their ability to pay their tax.

Our message to customers is simple: if you can pay your taxes then you should do so – but if you’re struggling, we want to work with you to agree a plan based on your financial position.

It is vital we continue our debt collection work, not only to bring in money that funds public services like schools and the NHS, but also to support economic recovery and growth.

We will do everything we can to help businesses with temporary cash-flow issues to survive as the economy grows, but where businesses have little chance of recovery, we do have a responsibility to act. It is in no one’s interests to simply allow unsustainable debt to build up unchecked.

What we will do

When a customer has a tax debt, we always try to contact them by phone, post or text message so that we can talk about their situation and agree a way forward. We urge customers to respond to these communications as soon as possible because, unless we can discuss their situation, we cannot tell if they need support or are simply refusing to pay.

Customers can check if the contact they receive from HMRC is genuine, by using our guidance on how to identify HMRC related scam phone calls, emails and text messages.

In all cases, we want to work with customers to find a way for them to pay off their tax debt as quickly as possible, and in an affordable way for them. Everyone is different, so the support we offer varies from customer to customer. For instance, we can discuss affordable payment options, such as a payment plan (called Time to Pay), where customers pay what they owe in affordable instalments. We typically have more than half a million arrangements in place at any one time, and more than nine out of ten of them complete successfully.

Even if customers cannot pay anything straight away, by getting in touch we can understand their circumstances better. We may be able to offer a short-term deferral, which means nothing would need to be paid for a set period of time, and we would take no further action to collect the tax debt until that time has lapsed.

As part of agreeing Time to Pay arrangements with businesses, we will also talk about other forms of support available they may be eligible for. For example, exploring the range of government-backed lending support like Bounce Back loans and Coronavirus Business Interruption Loans, and agreeing repayment holidays or extending repayment terms.

More information about payment arrangements (Time to pay) is available at How HMRC supports customers who have a tax debt.

Where customers do not get in touch, or refuse to pay

Where customers do not respond to any of our communications, or refuse to pay when they can afford to, we may try to visit them at their home or business address. Contacting customers in this way helps us understand their circumstances, including identifying if they are vulnerable or in need of extra support, and we will always follow COVID-19 guidance.

In the first instance, these visits will focus on making sure customers are aware of their tax debt and the support available to them, as well as asking about their financial situation and ability to pay. We will work with them to agree how best to settle the debt and, in the vast majority of these cases, we are able to agree a payment or payment plan so no further action is needed.

From September 2021, where customers are unwilling to discuss a payment plan, or where a customer ignores our attempts to contact them, we may start the process of collecting the debt using our enforcement powers. These powers include taking control of goods, summary warrants and court action including insolvency proceedings, but we only use them as a last resort and we take great care to use them fairly and carefully.

When choosing the appropriate action, we will do all we can to help customers facing temporary financial setbacks. We will only consider collecting tax through insolvency proceedings for example, where customers have been found to be fraudulent, deliberately non-compliant, or where they are continuing to accrue debt with no prospect of being able to settle their existing debts.

There is more information about our enforcement powers in our guidance on how HMRC treats customers who have a tax debt.

Extra support for customers

Our Debt Management teams are trained to identify and support customers who might need extra help managing their financial affairs. We work with organisations such as Mind and the Alzheimer’s Society to help our advisers identify and support customers who have mental health issues or who are demonstrating emotional distress.

Debt advice

Where an individual or business is struggling to pay HMRC and other creditors, they can often benefit from independent debt advice. Our advisers can help by providing information about how to access this advice.

Debt Respite Scheme

The Debt Respite Scheme is a new government scheme (available in England and Wales - Scotland has its own Debt Arrangement Scheme in place, and Northern Ireland is currently not included in this scheme) to help people who struggle to cope with the money they owe to take control of their finances. HMRC is part of the Debt Respite Scheme , under which customers can apply to a debt adviser for breathing space where creditors stop all enforcement activity and all interest and late payment penalties stop. More information is available at Debt Respite Scheme (Breathing Space) guidance for creditors.