Technical Guidance

How HMRC treats customers who have a tax debt, August 2020

HMRC have released a policy paper titled 'How HMRC treats customers who have a tax debt' with guidance for taxpayers who find themselves having difficulty paying their tax. This guidance provides a useful overview of HMRC’s approach, in terms of the enforcement action it may take where payment is not made. Link

Highlights of the policy paper below - 

  • No customer will be forced to sell their main home to fund a Loan Charge or Disguised Remuneration tax bill.
  • There are also occasions where we might ask customers to consider drawing equity from their property in order to settle their debt quickly and avoid interest or shorten a Time to Pay arrangement.
  • For some wealthy customers who have significant equity in property or properties that exceed their needs, we may ask them to release equity to clear the debt or reduce the amount of time they need to repay. If they do not, we may proceed with insolvency action.
  • We consider pension payments as income, including any lump sums on retirement. We will therefore consider pension payments in our assessments of customers’ ability to pay a debt. However, we will not ask customers to draw on funds from their pension pots to repay their debt to HMRC.
  • Of all insolvency proceedings that go ahead, only around 10% of them are petitioned by HMRC. In the 2019 to 2020 tax year HMRC petitioned for insolvency in 5,604 cases, which is 0.09% of the total 6.5 million debt cases we handled in that year. Of those cases, around half of them resulted in bankruptcy, sequestration or winding-up orders.
  • Where HMRC is a creditor, we are invited to vote in favour, against or abstain on a CVA or IVA proposal. In making our decision, we consider the paying of the debt and also assess customers’ likely ability to pay future taxes. As part of this, we will seek assurances from the party proposing the arrangement that steps have been taken to remedy whatever went wrong, so we can have confidence that supporting the voluntary arrangement will not put future tax at risk
  • In considering IVA or CVA proposals, we always look to support customers who are experiencing temporary financial difficulties. We look positively at proposals where a customer’s circumstances are explained fully and honestly, and where the offer being made is both achievable and is the best outcome for the country’s vital tax revenues.
  • HMRC will supply the details of the company debts to an Insolvency Practitioner ‘the Monitor’ appointed to oversee the moratorium. 
  • HMRC does not control or direct the IP’s actions – any action taken is a matter for them, in accordance with their statutory duties.



19 August 2020

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Caroline SumnerCaroline Sumner
Technical & Education Director
020 7566 4207
Ben LuxfordBen Luxford
Technical Manager
020 7566 4218

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