HMRC recently published two policy papers in relation to how they treat and support those customers with tax debts.
This insight into HMRC’s thinking is particularly relevant in light of the current economic circumstances and the impact Covid-19 has had on businesses and households alike. It provides a clearer picture of HMRC’s own view and expectation from customers as we embark on yet another journey of recovery, however this time in the “new normal”.
“We’re here to help”
From across both papers it is certainly notable how supportive and understanding HMRC appear to be to a customers circumstances.
Phrases such as “we want to work with them”, “we want to find a way to help them pay”, “we are always ready to help”, “we do not want out customers to worry” and “we’re not here to make things difficult” are certainly encouraging and provide comfort to those in financial difficulty that HMRC are willing to work with those customers and agree a solution.
What is clear from the policy papers, is that early engagement with HMRC regarding any financial difficulty is vital so that they understand you are simply “unable to pay”, rather than “unwilling to pay”. This is key to avoid further enforcement action being taken by HMRC.
No “one size fits all” approach
Whilst there is no individual solution to a debtor’s financial difficulties, there are a range of solutions available which can assist a debtor, depending on whether the issue is a short-term cashflow constraint or part of a more fundamental solvency concern.
HMRC have stressed that any solution should be affordable and will depend on a customer’s specific circumstances i.e. compliance history, level of debt, level of engagement to date, asset position, earning ability etc.
HMRC are willing to engage with debtors in Time to Pay arrangements to address historic liabilities over an agreed period however the term and repayment amount will differ depending on the above factors. Such Time to Pay arrangements can also include penalties and interest, which if left unaddressed can add significant burden to an already difficult financial situation.
It is undoubtedly true that engaging with HMRC (and indeed all creditors) in a timely manner, ensuring transparency and honesty in all dealings, will ultimately serve beneficial.
It is also important that debtors choose the right solution that is both affordable and addresses the overall financial / solvency issue. Whether this be a Time to Pay arrangement, an IVA / CVA or indeed Company moratorium (introduced under the recent Corporate Insolvency and Governance Act) independent professional advice should be sought at any early stage.
“We urge customers to respond to these communications as soon as possible”
HMRC have stressed that early engagement with them is vital in order to avoid debt enforcement action. The following powers are available to HMRC however they have stated that they will “only use these powers as a last resort”:
As recognised by HMRC, each individual circumstance is different and HMRC’s action will therefore vary accordingly.
However what is certain is that early engagement and independent advice are key to a successful outcome. This may be particularly relevant where HMRC are not the only area of financial pressure. It is therefore vital that any solution selected is therefore the most appropriate in the circumstances.