If you have reached the end of a dispute with HMRC and the tax, interest and penalties have been agreed, then you may find that you do not have the funds available to settle the amount in one go. Also, there could be another established debt, e.g. self-assessed amount due for repayment.

HMRC are within their rights to pursue this debt and have the power to enforce the sale of assets to finance the liability or, at the extreme, make a taxpayer bankrupt as well as taking funds from personal bank accounts in some circumstances. This is clearly best avoided, particularly since the reputational damage can be significant too.

HMRC would always rather facilitate the continued operation of a business (if only so that they continue to receive annual tax revenues!) so are often open to discussing payment options if it is possible for the taxpayer to settle their liabilities over a set period of time, rather than pursuing bankruptcy. The same applies to an individual; we call this process negotiating ‘time to pay’ arrangements.

Before considering a time to pay arrangement, HMRC would expect to review the taxpayer’s financial position very carefully to ensure that the client will be able to fund any agreement terms reached. They would also expect the taxpayer to use every possible way to meet their obligations and pay the tax, interest and any penalties that are due in one lump sum, plus for example, taking loans and realising assets.

These financial checks can be detailed and intrusive. Getting an industry-recognised specialist involved will mitigate many of HMRC’s concerns and can make the process of agreeing time to pay run a lot smoother.

There is a relatively short period of time at the end of an enquiry or investigation when agreeing a time to pay arrangement with the Inspector is possible. Once a debt has been passed to HMRC’s “Debt Management” unit, it can be much harder to negotiate a payment plan. It is always better to speak to a specialist as soon as possible.

If you, or your client, have been contacted by Debt Management directly then do get in touch as there are still options. We are used to dealing with Debt Management and, put simply, we know what they will and will not accept.