01 December 2021

Her Majesty’s Revenue and Customs (HMRC) discusses its approach to debt collection now that we are emerging from the Covid-19 pandemic, outlining the support available

Since the start of the Covid-19 pandemic, businesses and people across the UK have seen their finances impacted. Companies have had to shut their doors in response to government guidelines or have been unable to operate due to restrictions. It has been a tough time for many.

Unfortunately, this has led to some people falling behind with payments, including taxes, leaving many more people in debt than before the pandemic. But HMRC is taking a compassionate and common-sense approach to supporting people to get back on track.

Throughout the pandemic, HMRC’s staff played a key role in delivering and administering government support schemes, such as the coronavirus job retention scheme (CJRS) and the self-employment income support scheme (SEISS).

HMRC shifted priorities, dramatically reducing the number of times it was contacting customers with debts, and prioritising the vital schemes helping keep businesses and individuals afloat.

Many customers with tax debt have not heard from HMRC for some time, but as Covid-19 restrictions have lifted, it has steadily and cautiously increased its contact with customers. HMRC has re-written its customer letters, and those of its private sector partners (debt collection agencies), giving a clearer offer of support and urging customers to make contact if they can’t pay. It is important customers get in touch to discuss their debt position. If they don’t, HMRC can’t tell if customers need help or are simply refusing to pay. More strongly worded communications, and more robust debt enforcement activity may be considered where customers haven’t responded to communications. The message HMRC is delivering is simple; if you can pay your taxes, you should – but if you’re struggling, HMRC will listen and do its best to support you.


What support is available?

HMRC will tailor its support to meet the needs of each customer. The most common support is through a payment plan (called time to pay), where customers pay the amount they owe in instalments.

Discussions regarding a customer’s financial circumstances will take place, what they can afford will be assessed and the amount of time they need will be considered. There’s no upper limit to the amount of time a customer can have to pay, but customers should repay their debt as quickly as possible, while ensuring it is affordable and sustainable. Arrangements can change over time – increasing payments where a customer’s financial position improves or decreasing payments if their position worsens.

Self-assessment customers owing £30,000 or less can set up a time to pay arrangement spanning up to twelve months online without speaking to a HMRC adviser once they’ve filed their tax return.

If customers can’t afford to pay anything right away, HMRC will still help. Where customers can demonstrate they’ll be able to pay everything they owe over time, HMRC may agree a short deferral period for the customer to get their affairs in order, stopping contact for an agreed period.

Customers who need a little more time and further support to resolve their overall debt position might want to consider seeking support through the debt respite scheme. As part of that scheme, interest would be frozen for a ‘breathing space’ period, which allows a customer to get advice and review their finances without being contacted by creditors for a specific period.

Payroll professionals might see one form of recovery in their daily jobs. In some scenarios, customers can pay their self-assessment bill through their pay as you earn (PAYE) tax code.


What happens if people don’t pay or get in touch?

It depends on previous interactions with HMRC, and the amount and type of tax customers owe.

HMRC has resumed face-to-face visits, getting in touch with customers who have been uncontactable by letter or phone. This is to ensure that customers are aware of their debt and to discuss support options. HMRC can also identify customers who are vulnerable and offer further help and assistance.

Some debts are placed with debt collection agencies to collect on HMRC’s behalf. Customers are only contacted by a debt collection agency after HMRC has attempted contact.

If unable to get in touch, HMRC can ask the debt collection agencies to phone customers, or issue letters and text messages on their behalf. Debt collection agencies never visit customers face-to-face at their home or place of work on HMRC’s behalf.

If customers continue to avoid paying where they have the means to do so, HMRC does have enforcement powers to collect the tax through court proceedings or insolvency, but it only ever does this as a last resort.

HMRC is here to support customers to manage their tax debt, and to return them to financial good health. It continues to support customers to pay their debts either in full or to set up a plan to repay. 

Featured in the December 2021 / January 2022 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.