If you are struggling to pay HMRC debt you may be considering the option of a debt management plan (DMP). However it may not be the best way to resolve the problem.
Included in this article:
- Will HMRC agree to a DMP?
- Can you leave tax debt out of your Plan?
- What alternative solutions are available?
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Will HMRC agree to a Debt Management Plan?
HMRC are unlikely to agree to their debt being included in a DMP. The reason for this is that although they may agree to giving you time to pay the tax that you owe (known as a Time to Pay agreement) they will usually require it to be repaid within 12 months.
The problem is that your debt Plan will normally take far longer than 12 months to complete and because all your creditors have to be paid at the same time HMRC will not agree to be included.
The advice normally given if you are starting a DMP is to include all of your unsecured creditors and if they do not initially agree to the payments you have proposed you simply continue to pay them the proposed amount anyway because after a few months they will usually come around.
However this will not be the case with HMRC debt. If they do not agree to your payment proposal and you do not make a better offer then they are very likely to take further legal action against you to enforce payment and even go so far as to petition for your Bankruptcy.
Could I leave my HMRC debt out of my DMP?
If you have other debts and want to press ahead and use a DMP for these you will need to leave your tax debts out and negotiate a separate Time to Pay agreement directly with HMRC.
This must be done before setting up your main Plan. In this way you can offer as much of your disposable income as necessary to achieve a Time to Pay agreement which is acceptable to HMRC. Once this is done you can then use the money you have left to start your Plan with your other unsecured creditors.
This might mean that the amount you can pay into your Plan at the start is relatively small. However when you have finished your payments to HMRC you can then add these which should allow you to pay off your remaining debts much more quickly.
What is the alternative if I cannot afford to pay my HMRC debt and a DMP?
If you do not have sufficient disposable income to agree a Time to Pay agreement with HMRC or if having managed to negotiate this you are left with nothing to pay your other creditors then a DMP is probably not suitable for you.
There are however alternative debt solutions that you can consider where you are able to include tax debt. One of the most common is an Individual Voluntary Arrangement (IVA). If you use this you will not need to go through the hassle of negotiating a separate Time to Pay agreement as HMRC debt is automatically included.
BMD Tip: If you are a home owner you do need to understand how your property would be affected if you use this type of solution.
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