What is Insolvency? - HMRC Tax Advice

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HMRC Enforcement

The market for your business can change in an instant, and as such, it's very easy to enter into a slump of financial difficulty.

Finding the cash to pay your creditors may be hard enough, but when you can't find the funds to pay for your HMRC payments, matters become very serious and the future of your business will be at serious risk. Her Majesty's Revenue and Customs (HMRC) take a several approaches towards recovering unpaid tax debt.

HMRC Tax Debt

Taxpayers often find that a big change in circumstances can leave them in severe financial difficulties, with the self employed particularly at risk.

Experiencing problems with cash flow can cause a difficult dilemma as to where to prioritise, with mortgage payments, creditor repayment commitments and of course, meeting tax payment requirements.

Tax payments are a legal priority and are one of the most difficult areas for those who are struggling with debt problems in other areas of their business.

HMRC Tax Recovery

Some of the methods used by HMRC to recover tax debt include:

  • Bailiff Action. HMRC doesn't need to apply for a court order in order to visit your business and take equipment or stock to the value of the debt. If your business isn't a limited company and you don't have enough equipment or stock to meet the value of the debt, HMRC staff may visit your home and take items from there in order to cover the value of the debt.
  • County Court Action. HMRC may seek county court action against your company to gain a judgement, allowing them to execute enforcement methods, charging orders or attachment of earnings.
  • Magistrates' Court Action. If the amount owed to HMRC is below £2,000, the magistrates' court may be used. In such circumstances, a hearing would be arranged, whereby you should attend with your business budget and household budget. Repayment of the debt in instalments will be arranged according to what you can afford. If you fail to meet the agreed repayments, a further hearing will be arranged to determine whether you should be given a prison sentence. If you are found guilty of 'culpable neglect' or 'wilful refusal' you may be given a prison sentence, but the court cannot write the debt off.
  • Bankruptcy. Tax debt of just £750 or more may result in the HMRC filing bankruptcy proceedings against you.


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This website has been written and intended for registered limited companies in the UK only. The site contains general information and resources for limited companies only in financial trouble. Insolvency Helpline only work with limited companies to offer solutions for their business debt problems. Insolvency Helpline cannot offer help or advice any other entity except limited companies. Insolvency Helpline does not advise individuals, sole traders or partnerships seeking debt advice. If you are an individual, sole trader or partnership seeking advice, we recommend using an alternative service.

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Tel: 0800 668 1391 | Email: info@insolvencyhelpline.co.uk | Web: www.insolvencyhelpline.co.uk