Step 3 Dealing with your priority debts

Income tax

Important:

tax returns

HMRC will not accept an offer to pay arrears unless your returns are up to date. If you are having trouble putting in your tax return, for example, because you have lost your figures, or your accountant is holding on to your books because you have not paid their bill, contact us for advice.

Accountants

You must contact HMRC as soon as possible to arrange time to pay income tax arrears.

Make an offer to pay off the debt at a rate you can afford, and use Your budget to support your offer. Even if your offer is refused, start paying what you can afford, no matter how small the amount.

If you think your offer has been unfairly rejected, ask HMRC to review it under their complaints procedure.

If your tax return is late, HMRC will decide (‘determine’) how much you owe them. If your debt has been worked out in this way, you must send in your tax return as soon as possible. You should do this even if you think you may be too late. This may mean the debt is reduced and will also stop you being charged penalties for not sending in your tax return. You will be charged interest on any tax you are late paying.

HMRC can use a number of enforcement methods to recover an unpaid tax debt. These include the following.

Debt collection agencies

  • HMRC may pass your debt on to a debt collection agency. They are not bailiffs and have no rights to force entry to your business or home and take goods.
  • Use Your budget to make them an offer to pay by instalments based on what you can afford.

Summary warrant

  • HMRC can apply to the sheriff court for a summary warrant. If you do not pay the amount you owe in full, HMRC can take further action against you. This is called diligence.  To use most types of diligence, HMRC must send you a charge for payment giving you 14 days to pay the debt in full.
  • Diligence includes taking goods from outside your business or home. This is called attachment. HMRC can also apply to the court for a warrant to force entry into your business or home, but this is rare. HMRC can also take money from your bank account and take money from your wages if you are employed.

Sheriff court action

  • HMRC can apply to the sheriff court for a decree. If you do not make the payments the court has ordered, HMRC can take further action (diligence) against you.
  • HMRC can use the same types of diligence as if they had a summary warrant against you.

Warning:

no time to pay

Unlike debts such as business rates or council tax, you cannot apply for time to pay when HMRC applies for a summary warrant or decree.

What if my creditors take court action?

Bankruptcy


See our fact sheet:

Income tax debt.

  • HMRC can apply to make you bankrupt if the debt is for £3,000 or more. This is more likely if you owe tax from a number of years, or if you agree a repayment offer and then do not pay. They will look at making you bankrupt even if you have no assets, and you will usually have to stop trading.