HM Revenue and Customs (HMRC) has updated its guidance for people who owe tax, setting out the steps it can take to recover outstanding payments and the help available to those struggling to settle their bills.
The guidance explains that people who fail to respond to requests for payment could face enforcement action, including deductions from wages, recovery of money from bank accounts or the seizure of possessions.
In Scotland, HMRC can apply to a sheriff court for a summary warrant to recover unpaid tax. If granted, a sheriff officer can serve a charge for payment, giving the person 14 days to settle the debt or agree to a repayment plan. If the debt remains unpaid after that period, HMRC may instruct sheriff officers to take further action.
Enforcement as a last resort
However, the tax authority stressed that enforcement powers are used as a last resort and that it will normally try to contact people and agree on an affordable way to repay what they owe.
The updated guidance is available on GOV.UK.
What happens if you cannot pay your tax bill?
HMRC advises anyone who cannot pay their tax bill in full or disagrees with the amount owed to contact its Payment Support Service as soon as possible.
It states that it will work with people to find a way to settle outstanding tax as quickly as possible while taking their financial circumstances into account.
Before taking enforcement action, except in cases involving suspected fraud or criminal activity, HMRC advises that it will try to contact the person and agree a way forward. This may include arranging affordable instalments through a Time to Pay agreement.
The 14-day deadline in Scotland
HMRC has specific powers to recover unpaid tax in Scotland under Section 128 of the Finance Act 2008. It can apply to a sheriff court for a summary warrant, which is a court order allowing debt recovery action.
Once a summary warrant has been granted, HMRC can instruct a sheriff officer to serve a charge for payment. The person then has 14 days to either pay the outstanding amount or agree a payment plan to settle the debt in instalments.
If neither happens, HMRC may instruct a sheriff officer to take further enforcement action, known as diligence. This can include:
- Bank arrestment: recovering money from a bank account
- Earnings arrestment: taking payments from wages
- Attachment: seizing and selling possessions
- Money attachment: recovering cash from a business till
These measures are not automatic when someone misses a tax payment. They form part of the formal debt recovery process after HMRC has obtained a summary warrant.
Recovery through tax codes and debt collectors
HMRC can adjust the tax code of someone receiving income through Pay As You Earn (PAYE) to collect outstanding tax debts. The guidance states that deductions can begin during the current tax year and are spread across the remaining available months. It also states that up to 50 per cent of a person's gross income can be taxed through this process.
HMRC can also use debt collection agencies to contact people about outstanding tax. The guidance confirms that agencies working on behalf of HMRC may contact people by letter, text message or telephone. However, debt collection agencies working for HMRC will not visit people at their homes or workplaces. This is different from HMRC's own debt collectors, who may visit someone to discuss their circumstances and collect payment.
HMRC also provides an official list of the debt collection agencies it uses, allowing people to check whether a company contacting them is genuine. Anyone uncertain about a request for payment should verify the contact using official HMRC guidance rather than relying solely on details supplied in an unexpected message.
Recovery from bank accounts and property
The guidance also explains that HMRC has powers to recover money directly from bank and building society accounts. In England, Wales and Northern Ireland, direct recovery of debts can apply where someone owes £1,000 or more and has sufficient funds to cover the debt and reasonable living costs. In Scotland, recovery from bank accounts can take place through the summary warrant process.
HMRC can also pursue court action involving certain assets, although the legal procedures differ across the UK. The guidance states that property charging orders do not apply in Scotland. HMRC also makes clear that it will not ask people to withdraw money from pension pots to settle tax debts, although pension payments already being received may be considered when assessing their ability to pay.
People struggling to pay their tax bills are encouraged to contact HMRC before the debt increases or enforcement action begins. A Time to Pay arrangement may allow outstanding tax to be repaid in instalments based on individual financial circumstances. HMRC states that people should respond promptly if contacted, particularly if they need support or are unable to pay the full amount. Those with other debts can also seek free independent advice through MoneyHelper. Further information about HMRC's Payment Support Service and additional assistance is available on GOV.UK.
