Technical Guidance

How HMRC supports 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 support that it can offer (such as time to pay arrangements). Link

Highlights of the policy paper below - 

  • There is no standard Time to Pay arrangement. We discuss a customer’s specific financial circumstances, look at what they can afford to pay, and then use that to work out how much time they need. There’s no upper limit on the amount of time that someone can have to pay, but we will look for customers to repay their debt as quickly as possible while maintaining affordable payments.

  Personal debts

  • The length of the arrangement depends on the amount owed and customer’s financial circumstances. We look to strike the right balance between helping customers clear their debt as quickly as possible, while making sure their monthly payments are affordable, and so they are sustainable over the length of the agreement.
  • Where a customer has the means to pay their tax debts by releasing assets, for example, savings, shares, or equity in a property, we’ll discuss these options with them.

  • If there are assets that we both agree can be released, then we expect them to be used to reduce the debt as much as possible before we agree a Time to Pay arrangement.

  • We consider pension payments as income, including any lump sums on retirement, so we will include this in our assessments of customers’ ability to pay a debt. But we won’t ask customers to release funds from their existing pension pots.

Business debts

  • Business finances are often complex, so we ask our business customers to calculate what they feel they can afford to pay and submit their best proposal to us for review. We then ask questions about their proposal, to make sure it’s affordable, while paying off the debt as quickly as possible.
  • The length of the arrangement will depend upon how much the business owes and their financial circumstances. As with all our Time to Pay arrangements, this will be reviewed regularly and can be adjusted over time. They can be shortened where a business’ financial position improves, or lengthened if their financial position worsens but remains in a position to recover.
  • Where a business has the means to pay its HMRC liabilities by releasing assets (for example, stock, vehicles or shares, directors putting personal funds into the business, business lending or extending credit lines) then we will discuss this with them.

  • If there are assets that the customer and we agree can be released, including equity in a business property, then we would expect them to be used to reduce the debt as much as possible before we agree a Time to Pay arrangement.

New tax liabilities arising during a Time to Pay arrangement

  • Where customers are unable to pay a new tax bill that has become due, they should contact us as soon as they realise it. This will result in the cancellation of their existing Time to Pay arrangement, but we will try to re-negotiate the arrangement to include this new debt.
  • In these cases, we will contact customers to explain why the arrangement has been cancelled. In order to set up a new arrangement, we will need to carry out a further assessment on their ability to pay.


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

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