HMRC give September deadline for bad debt collection

HMRC have published its policy document, ‘Collecting tax debts as we emerge from coronavirus (COVID-19)’. It warns that should companies or individuals ignore HMRC, the agency would initiate enforcement action after a September 2021 deadline.

The policy document outlines its process in handling Outstanding debt to HMRC. It takes a sympathetic tone on individual and company debt but ultimately warns it will take enforcement action should nothing be done by 21 September 2021.

HMRC warn that where businesses have little chance of recovery it may have to take action, “We do have a responsibility to act, not least to protect their competitors and viable businesses in their supply chains. It is in no one’s interest to simply allow unsustainable debt to build up unchecked.”


Should an individual or business have an outstanding debt with HMRC, it will begin a process to regain it.

HMRC warns that ignoring these communications means that it cannot differentiate between those in genuine need of support or those simply refusing to pay.

For those with financial difficulties HMRC undertakes to discuss:

  • Affordable payment options, such as a payment plan (Time to Pay). HMRC states that it has more than half a million arrangements in place at any one time with more than nine out of ten of them complete successfully.
  • As part of agreeing time to Pay arrangements with businesses, HMRC may offer advice on other forms of support that may be available:
    • Bounce Back loans.
    • Recovery loan schemes.
    • Coronavirus Business Interruption Loans.
    • Agree repayment holidays.
    • Extending repayment terms.
  • For people that cannot pay anything straight away, HMRC requires communication to better understand circumstances.
    • A short-term deferral may be available. Nothing would need to be paid for a set period of time.
  • Debtors may be able to use The Debt Respite Scheme, a new government scheme available in England and Wales. Scotland has its own Debt Arrangement Scheme. HMRC is part of the Debt Respite Scheme, under which customers can apply to a debt adviser for breathing space where creditors stop all enforcement activity and all interest and late payment penalties stop.

Refusal to pay

Where customers do not respond to any HMRC communications or refuse to pay when they can afford to, they will be visited by HMRC officers.

  • From September 2021, where people are unwilling to discuss a payment plan or ignore attempts to contact them, HMRC may start the process of collecting the debt using enforcement powers. These powers include:
    • Taking control of goods.
    • Summary warrants and court action including Insolvency proceedings.

HMRC will only consider collecting tax through insolvency proceedings where customers have been found to be:

  • Fraudulent.
  • Deliberately non-compliant.
  • Where they are continuing to accrue debt with no prospect of being able to settle their existing debts.
9th August 2021