Overdue Tax and Credit Rating

Blue88

Hi

I have searched the internet and this site and can't find any reference to this. My question is basically: are HMRC likely to treat an arrangement to pay off overdue income tax by installment the same way a finance company would treat a special arrangement to pay (AP) credit and place an indicator on my credit files?

I gather that in any case, HMRC don't easily grant such arrangements, and essentially treat someone who can't pay the same as someone who won't pay. I also am aware that they can refer outstanding payments to debt collection agencies, and pursue tax debtors through the courts, in much the same way as finance companies do.

The overdue amount arose because back in 2010/11 my return was complicated, because of 4 different sources and types of income - as it was the second time I ever filed a return, and my first return was more straight forward, I made a mistake and overstated the amount of tax paid, resulting in an over generous refund.

HMRC recently audited my return, and advised that I underpaid and that I owe the additional tax by 11 May. I am currently on a very low income (so low that I don't currently pay tax) and will only be able to pay by borrowing from my family.

I am also self employed (though not a company or sole trader) and a clean credit record is crucial if I am to borrow on assets to raise funds for much needed further investment later this year (I wouldn't be able to do this now, and even if I was I would still miss the payment deadline).

Many thanks for any insight!

PrettyNifty91

It will not affect your credit rating at all as they are not providing you with credit. Even if passed to an external DCA it should not affect your credit rating as they don't buy the debt from HMRC They just pursue on behalf for a fee.

a4a

As the above poster said, this will not be reported on your credit file as it is not a credit agreement, i.e. you have not borrowed money from HMRC.

Also, HMRC do not treat 'can't pay', the same as 'won't pay. They are not naive and have seen it all before and know who is a 'can't' and who is a 'won't', and although they may seem ruthless, they will work with you if they believe you are in the 'can't' bracket.

Out of interest though, you say you need a clean credit rating to borrow against 'assets', if you have assets, HMRC may well look at this and expect you to borrow now, or sell those assets to pay them. Why should they wait if you have the assets to pay them? They may then look at this as a 'won't' rather than 'can't'!

CreditCrunchie

mine is not reported on my file.

HMRC literally had me in tears when I rang to make an arrangement with them. They are really, really pushy! Do your research and have a good idea of all your incomings and outgoings before you ring them.

Blue88

Thanks to all of you for your very helpful advice.

@a4a - you asked about my assets - these are two properties I rent out, I personally see and treat this as a business, but as I own the properties in my own name, HMRC views rented property as a personal investment, not a business - while I am looking to remortgage in the not too distant future, and would certainly be more than prepared to pay the £400 odd tax out of that, it probably wouldn't be soon enough for HMRC. I am reluctant to start the remortgage application at the moment in any case, as I've just moved house. The rent from my properties provides me with just about enough to live on, although I am currently job hunting and looking at other means, such as retraining, to secure another income.

GingerBob_3

CreditCrunchie wrote: »

mine is not reported on my file.

HMRC literally had me in tears when I rang to make an arrangement with them. They are really, really pushy! Do your research and have a good idea of all your incomings and outgoings before you ring them.

Do not ring them. Never ring them. Communicate with them in writing only.

CreditCrunchie

I'm not sure I would have got it all sorted within one day otherwise Ginger, but you are probably right.

a4a

Blue88 wrote: »

Thanks to all of you for your very helpful advice.

@a4a - you asked about my assets - these are two properties I rent out, I personally see and treat this as a business, but as I own the properties in my own name, HMRC views rented property as a personal investment, not a business - while I am looking to remortgage in the not too distant future, and would certainly be more than prepared to pay the £400 odd tax out of that, it probably wouldn't be soon enough for HMRC. I am reluctant to start the remortgage application at the moment in any case, as I've just moved house. The rent from my properties provides me with just about enough to live on, although I am currently job hunting and looking at other means, such as retraining, to secure another income.

When you say business, is it a Ltd company?

Blue88

@a4a: no, it's not officially a business at all, but a private investment - I own the properties in my own name, subject to mortgages.

a4a

Blue88 wrote: »

@a4a: no, it's not officially a business at all, but a private investment - I own the properties in my own name, subject to mortgages.

In which case its personal and any money you owe HMRC personally will include such assets.

a4a

Also, you say - "I am also self employed (though not a company or sole trader)" - so what type are you ?