How do HMRC debt management powers work? This simple guide will explain the methods HMRC can use to recover a debt.
(4 minute read)
Paying Back HMRC
Nobody wants to be in debt with HMRC. However, mistakes can happen, especially if you manage your accounts yourself. As a result, it’s imperative that you understand HMRC debt management powers.
Remember: HMRC simply wants to retrieve the money owed.
They prefer working with (not against) businesses and individuals to recover debts. This means that negotiating is the best way to resolve problems amicably.
If you have missed (or will miss) a payment, letting HMRC know as soon as possible shows that you’re proactive about fulfilling your tax obligations.
HMRC supports those struggling through Time to Pay agreements which pause penalties to give you longer to pay.
A trustworthy accountant will guidance and support you to keep you on top of your finances, promptly informing you of problems and negotiating with HMRC on your behalf.
HMRC only use their powers when necessary. An officer may visit you at your home or business address to agree on how to settle your debt.
HMRC Debt Management Powers
Taking possession of assets
HMRC can remove your possessions to cover the cost of the debt, as well as a £75 Notice of Enforcement, auction fees and fees for the work of taking assets. They cannot take things that you need for security and wellbeing.
Recovering debt from your bank account
If there are sufficient funds in your bank account and you owe over £1000, HMRC can take the money directly from your account. They must leave enough leftover to cover reasonable living costs.
Recovering debt from your wages
The debt may be recovered from your wages via the PAYE system.
This court order prevents you from selling specific assets, such as property, without first paying off your debt.
Third party debt order
If someone owes you money, HMRC can collect this money against your debt. For example, if you are owed £2000 by a third party, HMRC can claim the money themselves.
This is a last resort. With negotiation, you can come to a voluntary winding up agreement. Alternatively, HMRC can enforce a company moratorium or begin bankruptcy and winding-up proceedings.
It is always best to negotiate with HMRC to come to a solution before they use their powers.
But this can be difficult for those managing their own accounts.
Hiring an accountant can help you keep track of your finances; preventing mistakes that lead to debt, notifying you of problems quickly and dealing with HMRC for you.
At Tax Expert, our team of specialists have years of experience in getting the best outcome for our clients.
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