Tax Debts

With more people struggling with their finances, the added burden of overdue tax demands or a tax credit overpayment can be the final straw.

What could happen if the debt is not paid (sourced from

Where there are outstanding tax demands, HMRC have a number of options available in order to reclaim the debt.

Distraint. This is where HMRC will take possession of any goods owned by the debtor and sell them in order to repay the amount owed as well as the costs of the Distraint itself. A representative will initially visit the individual’s home and make a list of all goods (excluding essential living items and tools of the trade) and request the debtor signs for them. They will then allow 5 days for any outstanding amount to be repaid. If it is not, they will take the goods listed. If the amount raised does not cover the debt owed, then this amount will still be considered a debt. Should the individual refuse to sign, then there will still be a 5 day period in which to pay, but the goods will be taken immediately.

Magistrates Court. Should an individual receive a magistrate’s court summons, then they can still repay the amount before the hearing date. If it goes to court, the magistrate could insist the amount is paid, plus any associated costs of the hearing. If it is not paid, then the bailiffs could be brought in. A magistrates hearing will only apply to those who owe less than £2,000, or have owed the amount for less than a year.

County Court. A County Court summons will be sent if Distraint or a Magistrates Court Summons are unsuitable for the circumstances. In order to avoid the legal proceedings, the individual should pay the amount owed, or submit a proposal detailing an agreed repayment date or schedule. If the summons is ignored, or payment not made, the county court could demand full payment is made with any associated court costs. Furthermore, the individual’s details will be put on the Register of Judgments, Orders and Fines. This could make opening a bank account or obtaining further credit very difficult. If the amount owed is paid in full within one month, then a request can be made to have the details removed from the register.

Bankruptcy. A petition for bankruptcy could be served if the debts are not repaid, or where the debts are more than any assets owned by the debtor. Should this occur, the individual will need to seek legal advice and it is likely an Insolvency Practitioner will be appointed to establish any assets and income that can be used towards the bankruptcy costs. If the individual owns their own home or property, it is likely that it will need to be sold to go towards the debt owed. Furthermore, any savings and investments will have to be released, again to pay back any outstanding debt.


Anyone who is concerned about how to pay a tax demand should contact their local tax office straight away in order to discuss options. It may be that a repayment plan could be calculated or an alternative deadline given. Where an individual is struggling with additional debts, it may be that an Individual Voluntary Agreement (IVA) could help, whereby an Insolvency Practitioner will calculate an affordable monthly amount that can be split between all creditors. This will take into consideration any essential expenditure such as a mortgage (which means the home will not need to be sold). Tax arrears will be included in the IVA proposal.