Debts to HMRC
The HMRC issues more bankruptcy petitions than anyone else.
If you’re facing tax payment problems, you should speak to HMRC before you start being fined for late and missed payments or become subject to legal action. In the first instance you should visit gov.uk/income tax for general enquiries.
What if I don’t pay my Tax debts?
The HMRC has extensive powers to enforce payment of tax and any tax arrears.
TaxAid.org.uk is a charity which advises people on low incomes whose tax problems cannot be resolved.
Bailiffs (Warrant of Control)
HMRC don’t need to obtain a court order to visit business premises and take items to sell to pay tax arrears.
If that does not satisfy the debt they can visit your home to do the same. In both cases, if denied entry the bailiffs, can get a warrant to break in using force.
County Court Action
The HMRC may go to the County Court and exercise one or more of options this gives for the enforcement of a debt. See see County Court Judgements for more info.
If you owe less than £2,000 HMRC can summon you to a hearing. You must attend with your business and household accounting information, to support an offer to pay by instalments.
If you don’t keep to these instalments another hearing will be arranged to decide whether you should be sent to prison. Before this can happen you will need to be found guilty of wilful refusal (having the money but refusing on a point of principle) or culpable neglect (having the money but ignoring the debt).
If you owe more than £5,000 HMRC can start bankruptcy proceedings against you.
Adjustment of tax code
Your tax code determines how much tax you pay. If you are an employee, the HMRC can raise your tax code so it collects more tax directly from your wages before you get it.
HMRC tax debts and IVAs
If you are a sole trader or are self-employed then your tax returns (not payments) must but be up to date before an IVA can be considered.
HMRC the largest creditors in many of IVAs.
Tax arrears can be included in an IVA as a creditor. This means the debt is treated as would one owed to any other unsecured creditor.
HMRC tax debts and Bankruptcy
Tax arrears can be included in Bankruptcy; this meaning such debts are written off once you are discharged. Bankruptcy is no easy way out and has a severe consequence.
Your home and other assets can be seized and disposed of to repay your debt and you can be made to make payments into the bankruptcy for 36 months.