Seeking agreement with the Revenue

Introduction

If you owe tax, the collector will want you to pay the bill immediately. If you cannot do so, you may be invited to make a proposal for clearing the debt, in other words to seek an agreement. This may be by letter or having a meeting. This may be by telephone, letter or having a meeting.

If you try to seek an agreement, the collector will want to know why you can't pay in full. You should be aware that you may be asked a lot of personal questions. For example, the collector may want to know what other members of your family earn, or what you spend on clothes or holidays.

You may be offended by such questions, and it is important to understand that the collector cannot force you to discuss your personal affairs.

From your point of view, the only reason for having such discussions is to try to avoid the collector taking enforcement action against you. You can choose not to discuss matters, but you then increase the risk of enforcement action, as the collector may feel that he has no other choice.

What the collector will do if you refuse to seek an agreement, or cannot reach an agreement

If no agreement can be reached, the collector will consider taking enforcement action, which will be one of the following measures:

• Distraint - (seizure of goods for sale at public auction),
• Summary Proceedings in the Magistrates' Court ,
• County Court proceedings or
• Bankruptcy.

You may not be worried about enforcement action

In certain circumstances you may not be worried about enforcement action. For example

• The Revenue does not normally take such action for debts below £100.
• Threats of distraint may not bother you if you have no possessions of value.
• If you have large debts, bankruptcy may offer you welcome relief from the pressure of creditors (but you should make sure that you understand what bankruptcy will mean to you).

Most people prefer to seek an agreement

In practice, most people would prefer to reach an agreement with the collector, rather than face enforcement action.

You might seek:

• A payment arrangement.
• Suspension of collection action for a period
• Waiver of the tax

Payment arrangements

Most agreements involve making a payment arrangement. Typically you offer to pay a certain amount each week or month, until the tax plus interest is cleared.

Suspension of collection action for a period

The collector may agree to suspend making demands for a period if you are temporarily unable to pay the tax, for example because you are unemployed or have business problems that should end fairly soon.

Typically, such an agreement may last for three or six months, with a review of your circumstances at the end of that period.

Waiver of tax

Very occasionally the Revenue decides not to pursue payment of a tax bill. This is sometimes known as remission . The tax is not permanently written off, but you will not receive further demands unless your circumstances improve unexpectedly.

Remission is most common in the case of a person who is elderly, sick or long term unemployed, and has no assets of particular value.

Freezing of interest

The Revenue cannot agree to 'freeze' interest on the tax, so as to help you to clear the debt. It is a legal charge.

Such waivers are commonly given by other creditors, but the Revenue must charge interest in full.

Lump sums

The Revenue will not normally agree to accept a lump sum - of less than the full amount due - in full settlement.

For example, Julian owes £2,000 in tax but has no money or other assets and is unemployed. He does not want to face enforcement action, and he tells the collector that his mother will give him £1,000 if the Revenue will agree to write off the rest of the debt.

The collector will not agree to this, even though the Revenue may receive nothing if it proceeds to enforcement action (since Julian has no income or assets).

If you want an agreement, you should act quickly

If you want to reach an agreement, then you should not delay. In its Code of Practice on Collection of Tax (Code of Practice 6) , the Revenue says:

"Most people pay their tax at the right time and it would be unfair to them if we did not pursue those who do not pay. If people have genuine difficulties in meeting their payments, and tell us about them, we will do what we can to help. If we are not told about your difficulties, all we can do is resort to the legal methods open to us to enforce payment of the debt...

If you know that you will have difficulty paying your tax when it is due you should tell us as soon as possible. The more you keep us informed, the more we are likely to be able to help."

How collectors negotiate

If you enter discussions with a collector, you must understand that the Revenue is not the same as other creditors. Sometimes it will refuse to agree to a proposal that a business creditor would happily accept, while in other cases it will be more sympathetic than other creditors.

Issues of policy

Apart from collecting your tax, the collector has a wider duty to protect the tax system as a whole. So he will sometimes make a person bankrupt even where it is clear that you have no assets. This may be done to stop you running up further arrears, or to make an example of you. On the other hand, a collector may sometimes decide not to take enforcement action if this would close a business down and lead to many redundancies.

Negotiations can be very personal

The collector will pay regard to your personal circumstances, and the following points may help and should be pointed out to him:

• If you are elderly
• If you are in poor health or have family problems
• If you are unemployed or dependent upon welfare benefits
• If you have always paid your tax on time before

On the other hand, it will not help if:

• You are, or have been, rude or aggressive to any Revenue staff
• You have paid other creditors in preference to the Revenue
• You have had unpaid tax debts before

Other factors that may be taken into account

The collector will also be influenced by the following factors.

The size of your tax debt . It may be easier to reach an agreement if the amount unpaid is relatively small.

If you are about to leave the country . The collector will not allow discussions to drag on if there is a risk that you are about to leave the UK .

If the tax bill has arisen unexpectedly . Particular sympathy should be shown if you owe tax because of a Revenue mistake (for example, if the collector is trying to collect a refund which you could not have known was made in error).

On the other hand, collectors can sometimes appear hard on self-employed people unable to pay their tax on time . They will often say that you have no excuse, because you should have set aside the money to pay the tax when the income was earned. Self-employed people often complain that collectors have little understanding of what it is like to run a business, and how difficult it can be to set money aside, or the problems that arise if a customer goes bust or disappears.

Understanding the job of each Receivables office

As mentioned earlier in the Introduction, it is important to understand who you are dealing with and be sure it is the right person to deal with your particular problem.

In general if you cannot pay you must speak to someone from 'Receivables' - this can be at one of the Accounts Offices, the local Recovery Office or Enforcement and Insolvency Service. You should contact the office from whom you have received the most recent contact.

You are likely to be contacted by phone. If so talk to them about the problem there and then or if you are left a message don't ignore it. Call them back - your problem is unlikely to go away and they certainly won't!

The earlier you make contact to discuss the situation the easier it should be to reach agreement acceptable to both sides. If not you risk enforcement action locally by Distraint, Summary proceedings in the Magistrates' Court or County Court proceedings, or in more serious situations, Bankruptcy proceedings in the High Court.

It is important to be aware of which kind of office you are dealing with, because of their different powers.