For people with tax to pay beyond PAYE then 31 January is the main date for payments. For the self-employed and some others a Payment on Account is also due on 31 July.
If you owe tax for more than a couple of months (and HMRC knows how much tax it is) then the demands are probably starting to get pretty heavy.
I want you to remember 2 rules about tax debts:
- Always open the letters from HM Revenue & Customs or the courts.
- Keep up a dialogue with the HMRC collectors or Debt Management Unit.
The reason to keep opening the letters is obvious, but important. You need to know what they say. For example you might think ‘there’s another tax demand – I can’t face another.’ But the letter might be saying pay us by Thursday or we are coming to lift your assets. You need to know.
Or it might be giving you some good news, or a cheque.
Gone are the days when you can safely assume that HMRC will send demands for 6 or 12 months before they seriously chase their money. Anyone in the professional world will confirm that HMRC chases its debts quicker now.
Once the collection process is making no progress HMRC will get a Statutory Demand on you. This is the first stage towards bankruptcy and must be treated as extremely important.
Once you get a Statutory Demand you can also count on owing yet more money. This is because you will be expected to pay the various legal costs in taking your debt through the legal process.
My second piece of advice was to keep up a dialogue with the tax collector. If you keep them informed of your situation they will treat you better than if you ignore everything they send you. You might be allowed to pay the bill in a series of post-dated cheques, for example. Though nowadays you may be expected to prove that you are unable to raise finance some other way to clear the tax debts. You may even have to submit some sort of cash flow plan showing what income may come in and payments go out over the next year.
If you agree to pay in instalments – and they agree to accept them – do your very best to keep your promises. But if you can’t, don’t let a cheque bounce. You will harm your reputation with the collector. Ring them about 10 days before the cheque is due and say there is a problem. You can then come to an arrangement.
The tax collector since Biblical times has had a bad reputation. Most of them are normal civil servants just doing a job. If you are friendly, sensible, honourable and open then you make their job easier. This will help you in the long run.
Talking to HMRC about your cash-flow problems is much more effective than ignoring them. They have big sticks – don’t leave them having to use them.
Paying even a little each month always wins Brownie points.