How HMRC uses debt enforcement powers, debt collection agencies and what happens if you live abroad when you do not pay your tax bill.
If you cannot pay the tax you owe in full and on time, HMRC can work with you to find a way for you to pay what you owe:
- as quickly as possible
- in a way that is affordable for you
Get help to work out debt repayments that meet your needs
Everyone is different, so the help we offer varies according to your needs.
You should always contact HMRC if you cannot pay the tax you owe or disagree with the debt amount. To discuss the best way forward, individuals:
If you are a business with a customer compliance manager then you should speak to us first.
If you have a tax debt, except in cases where we suspect fraud or criminal activity, we will try to contact you to talk about your situation and agree a way forward before we take any action.
- ask you to agree a payment plan based on your financial position, called a Time to Pay arrangement
- use any overpaid tax that would normally be repaid to you to clear other outstanding tax debts you have
- adjust your tax code to collect any outstanding tax debts, if you receive PAYE income
You should reply as soon as possible, so we know you need support and are not refusing to pay what you owe.
We can use our debt enforcement powers to collect outstanding tax if you do not speak to us about how you will pay what you owe.
If you are a resident outside the UK or have assets abroad, we can ask a foreign tax authority to collect the debt for us by using our international recovery agreements.
If you do not engage with HMRC or refuse to pay what you owe
If you do not respond when we try to contact you, we may either:
- visit you at your home or business address to help us understand your circumstances so we can work with you to settle the tax you owe
- use a debt collection agency to discuss settling your debt
Visiting you at your home or business address
If we visit you, we’ll:
- ask about your financial situation and your ability to pay
- try to agree how best to settle the debt with you, which might be making one full payment or paying through instalments using a Time to Pay arrangement
HMRC are able to take payment directly from you during a visit. This payment may be in full or a part payment as part of a Time to Pay arrangement.
All HMRC collectors have card payment machines to allow them to take payment from you safely and securely at your home or business address.
There’s a non-refundable fee if you pay by corporate credit card or corporate debit card. There’s no fee if you pay by personal debit card. You cannot pay by personal credit card.
If we cannot reach an agreement with you, we may use our enforcement powers to collect the debt.
HMRC and debt collection agencies
We may use a debt collection agency to contact you on our behalf, to discuss settling your debt. You may be contacted by:
- 1st Locate (trading as LCS)
- Advantis Credit Ltd
- Ardent Credit Services (trading as DRS — Debt & Revenue Services)
- Bluestone Consumer Finance Limited (trading as Bluestone Credit Management)
- BPO Collections Ltd
- CCS Collect (also known as Commercial Collection Services Ltd)
- Moorcroft Debt Recovery Ltd
- Pastdue Credit Solutions Limited
All the debt collection agencies we work with are regulated by the Financial Conduct Authority and must follow our processes and guidance at all times. We carry out regular reviews to make sure they do.
A debt collection agency working for us will only contact you by:
- SMS text message
They will never visit you at your home or place of work.
You can either:
- pay them what you owe us, if you are able to — once your payment has been cleared the agency will send it to us to credit to your HMRC account
- talk to them about how you can pay your debt using a Time to Pay arrangement
If you cannot pay what you owe in full or agree a Time to Pay arrangement, the agency will pass your case back to us to deal with. We will then contact you to tell you what will happen next.
Debt collection agency phone calls
When you speak to a debt collection agency on the phone, they will always ask you some security questions at the start of the call. This is to protect you and the confidentiality of your tax affairs.
They will not be able to talk to someone else on your behalf unless you give them consent to do so in the call. This consent will last 24 hours for each debt you discuss with them. If you want someone to act on your behalf for more than 24 hours, you’ll need to give HMRC written authority for them to do so by completing form 64-8.
If you tell the debt collection agency that you have an agent acting for you, the agency will need to check with us that they are authorised to speak to the agent before they can contact them. This may mean there is a short delay in dealing with your case.
What our tax debt enforcement powers are and when we use them
We have debt enforcement powers to help us collect outstanding tax if:
- we’re unable to contact you
- you refuse to pay what you owe
- your debt is returned to us from a debt collection agency
We only use these as a last resort, and they can be different for England, Scotland and Wales.
We will choose which powers are appropriate depending on your circumstances. We have a range of enforcement powers and these are not listed in any particular order.
Taking your possessions to cover the debt
We will always warn you and offer you an opportunity to pay what you owe before removing any of your possessions.
We can use taking control of goods regulations in England and Wales, and distraint in Northern Ireland to remove and sell assets to cover debts. In Scotland, we can use a summary warrant. You can find more information on this in section ‘Using a summary warrant to recover the debt (Scotland only)’.
In England and Wales, we will first issue you with a formal notice of enforcement that will cost you £75.
An HMRC officer will then visit you between 6am and 9pm if you live in England or Wales, or between sunrise and sunset if you live in Northern Ireland. They will ask you to pay your debt. If you do not pay, the officer will list your possessions which may be able to be sold to cover the debt and the costs to sell the items (for example, fees for auctioneers or advertising).
We will either take the possessions from your premises immediately, or ask you to sign a:
- controlled goods agreement if you live in England and Wales
- walking possession agreement if you live in Northern Ireland
The agreement will include a deadline for you to pay what you owe. You can continue to use the items but you cannot sell them or give them away while the agreement is in force.
If you do not follow the terms of the agreement or pay what you owe by the deadline we can remove the possessions and sell them. We will write to you to give you notice before we do this.
Although the possessions can only be listed by an HMRC officer, they can be collected by private auctioneers employed by us.
Whoever is collecting the goods can use a locksmith to enter premises to remove the goods, if necessary. They do not need a warrant from the courts or to give any notice to you first.
If the possessions sell for more than the debt, you will be paid the difference after the deduction of costs and fees. If they sell for less than the debt, you will have to pay the difference, and we will continue enforcement action until the debt is settled.
Certain fees will apply and these will be covered by the sale of your possessions.
Fees in England and Wales
A fee of £235 will be charged for HMRC taking control of your possessions, plus 7.5% of the proportion of the main debt over £1,500.
For possessions we remove and sell at auction there is a fee of £110, plus 7.5% of the proportion of the main debt over £1,500.
Fees in Northern Ireland
If you owe:
- less than £100 there is a fee of £12.50
- more than £100 there is a fee of between 0.25% and 12.5%, depending on the debt amount
For possessions we remove and sell at auction there is a fee of between 7.5% and 15%, depending on the auction.
Possessions we will not take
We will never take your possessions that are essential for your security and wellbeing.
There are specific guidelines on what we can take and we follow them at all times. The guidelines are in the:
- Taking Control of Goods Regulations 2013 for England and Wales
- HMRC Debt Management and Banking Manual for Northern Ireland
Using a Summary Warrant to recover the debt (Scotland only)
In Scotland, we are authorised under Section 128 of the Finance Act 2008 to apply to a sheriff court to obtain a summary warrant in respect of a debtor’s debt.
A summary warrant is a type of court order which is granted for debts.
When a summary warrant is granted, we will instruct a court-appointed official (called a sheriff officer) to serve a charge for payment if you owe tax. You will then have 14 days either to:
- pay your outstanding debt
- agree a payment plan to pay the tax owed in instalments
If you have not paid the debt after the 14 days, we may instruct the sheriff officer to carry out what we consider the most appropriate diligence action to avoid proceeding to insolvency.
Diligence actions we may use are:
- recovering the debt from a bank account (bank arrestment)
- recovering the debt through your earnings (earnings arrestment)
- seizing and selling your possessions (attachment)
- recovering money from a till in a shop (money attachment)
Recovering the debt directly from your bank account
Creditors like HMRC (or those acting on a creditor’s behalf) can recover debts directly from your bank and building society accounts. This is called ‘direct recovery of debt’.
If you live in England, Wales or Northern Ireland, HMRC can do this when you:
- owe £1,000 or more
- have enough funds in your bank accounts to cover the debt and your reasonable living costs
In Scotland, a summary warrant can be used.
There are strict rules to make sure:
- you do not suffer serious difficulty due to money being taken directly from your accounts
- enough protection is in place for you if you are vulnerable
You can find out more in the Issue Briefing: Direct Recovery of Debts.
Recovering the debt through your tax code
If you cannot pay the tax you owe in full and on time we may adjust your tax code to collect any outstanding tax debts. If we do this, we can start to collect through your tax code in the current tax year. The amounts we collect will be spread equally across available months in any given tax year. We can tax up to 50% of your gross income through this process.
Recovering the debt through county court proceedings, property and pensions
We can use county court processes if you have assets to cover the debt and refuse to pay it.
In Scotland, a summary warrant can be used.
We will review your circumstances before deciding which of these options to use:
- charging orders
- attachment of earnings orders
- third party debt orders
- pension payments
A charging order is an order of the court. It stops a debtor from selling specified assets without first paying what the court has ordered they must pay out of any proceeds.
The most common asset subjected to charging orders in the UK is land or property, but charging orders can be placed on other assets, such as some financial products including:
- stocks and shares
- personal equity plans
- Individual Savings Accounts (ISAs)
Charging orders give creditors like HMRC the power to recover debts from the sale of a property:
- when you sell a property that you own
- through a court action known as an ‘order for sale’, to force you to sell the property
In Northern Ireland, we can obtain a charging order over land or property through a civil court process by the Enforcement Judgement Office. Property charging orders do not apply in Scotland.
We do all we can to avoid forcing you to sell your primary property. We may only force the sale of your properties if you have either:
- more than one property
- been involved in criminal activity
We will not make you sell your main home to fund a loan charge or disguised remuneration tax bill.
If we try to recover a debt through property charging orders and orders for sale, the court will decide whether to grant the order.
We may also ask you to consider releasing equity from your property to either:
- settle your debt quickly and reduce interest
- shorten a Time to Pay arrangement
If you have a lot of equity in property or multiple properties, we may ask you to release equity to clear your debt or reduce the amount of time you need to pay. If you do not do this, we may proceed with insolvency.
Attachment of earnings orders
If you are in debt and in PAYE employment, the county court can grant us an ‘attachment of earnings order’, or an ‘arrestment of earnings’ in Scotland.
These will allow regular deductions to be taken from your wages to pay your debt. Safeguards will be put in place to make sure you will have enough money to cover your essential expenses.
Third party debt orders
If you’re in debt and someone else owes you money, we can apply for a third party debt order. The order will allow us to take direct payment from whoever owes you money to pay what you owe.
Third party debt orders only apply in England and Wales.
Similar actions are available under distraint in Northern Ireland, and a summary warrant in Scotland (known as arrestment).
We consider pension payments as income, including any lump sums you may receive when you retire. We will consider pension payments in our assessment of your ability to pay the tax you owe.
We will not ask you to draw on funds from any of your pension pots to pay your debt to us.
We will only apply to the courts to make a person or company insolvent as a final course of action, after we have considered all other ways to recover a debt.
Insolvency usually only applies when one or more of the following are met:
- we think your debt position will not be recovered and you will not be able to pay future debts
- you have actively gone out of your way to avoid paying even though you are able to do so
- we suspect you are not being honest about the assets you hold, and we think you could pay quicker
When we take insolvency proceedings against individuals, partnerships or companies, we are the same as any other creditor and are strictly bound by the requirements of insolvency law.
Insolvency processes we are involved in include, but are not limited to:
- voluntary arrangements
- company moratoriums using the Corporate Insolvency and Governance Act
- debt restructuring plans or schemes
- bankruptcy and winding up orders
For companies, a Company Voluntary Arrangement will need a licensed insolvency practitioner to put forward a proposal to creditors. The company directors will review the company’s past history and future trading prospects with the insolvency practitioner. If all parties are satisfied that there is a workable way forward for the company, a proposal explaining how its debts are to be dealt with can be considered by its creditors.
For individuals in England, Wales and in Northern Ireland, an Individual Voluntary Arrangement can be proposed on an individual debtor’s behalf by an insolvency practitioner. To work out a suitable payment plan, they will need to submit information about their:
- total debt position
- income and expenditure details
In Scotland, a debtor can choose to sign a trust deed, so regular payments are made to an insolvency practitioner to distribute to creditors.
When we are a creditor, we are invited to vote in favour, against or abstain on arrangement proposals.
Before making a decision, we will consider the paying of the debt and also assess your likely ability to pay future taxes. As part of this, we will confirm with whoever is proposing the arrangement that steps have been taken to correct whatever went wrong. This will make sure that supporting the voluntary arrangement will not put future tax at risk.
When we are considering any arrangement proposal, we always look to support you with temporary financial difficulties. We look positively at proposals where:
- your circumstances are explained fully and honestly
- the offer being made is achievable and is the best outcome for the country’s vital tax revenues
For all kinds of voluntary arrangement, no creditor is able to press for payment of debt that is included in the arrangement until it is agreed. If the arrangement fails, creditors regain the right to pursue the outstanding debt.
Find out more about HMRC’s Voluntary Arrangements service that helps and support businesses in temporary financial difficulties.
Company moratoriums using the Corporate Insolvency and Governance Act
When a company registered in the UK is in financial difficulty and has applied for a moratorium (a legal authorisation to debtors to postpone payment), it will be given time to restructure its finances.
We (along with other creditors) will stop recovery activity for 20 business days. This period can be extended to 40 business days, or a court can extend it up to a maximum of a year.
We will supply the details of the company debts to an insolvency practitioner who has been appointed to oversee the moratorium. We will be able to vote on any restructuring plan if the company proposes this to their creditors.
The moratorium will be reviewed by us to make sure the company:
- is meeting the conditions of the moratorium
- remains capable of recovery to pay its debts
Debt restructuring plans or schemes under the Companies Act
Under parts 26 or 26A of the Companies Act 2006, companies can seek court, shareholder and creditor approval for a debt restructuring scheme or plan — also known as a scheme of arrangement or a part 26A restructuring plan.
HMRC will only offer support to companies to restructure where we believe you have a realistic chance of succeeding. If we do not believe you have a realistic chance of succeeding, we will work with you to try and find other ways to repay your debt to HMRC. This could include going through a formal insolvency process.
Read more information on using debt management schemes to restructure your company’s finances.
Bankruptcy and winding up orders
A bankruptcy or winding up order may be granted because either:
- a creditor has petitioned for insolvency to the court
- an individual has applied for their own bankruptcy
In some cases, a licensed insolvency practitioner may be appointed. For an individual debtor, the insolvency practitioner appointed is known as the trustee. If the debtor is a company the insolvency practitioner is known as the liquidator.
The trustee’s or liquidator’s statutory duty is to realise a debtor’s assets and distribute them to the creditors.
We do not control or direct the insolvency practitioner’s actions.
International recovery agreements
We have recovery agreements with more than 87 different countries. These allow us to ask the tax authority in another country to collect a UK debt on our behalf from someone resident or established in their country, or with assets there.
There are four different type of international recovery agreements that cover tax, but they all work in a similar way. These are:
- Council Directive 2010/24/EU
- the Protocol on Administrative Cooperation and Combating Fraud in the Field of Value Added Tax and on Mutual Assistance for the Recovery of Claims relating to Taxes and Duties
- OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters
- a recovery article within a Double Taxation Agreement
Get help and extra support
We know that you may need extra support and understand you may have debts to other creditors as well as HMRC.
You should contact our Payment Support Service if you cannot pay the tax you owe or disagree with the debt amount.
If you’re struggling to pay HMRC and other creditors you can get free independent debt advice on the MoneyHelper website.