HMRC debt and negotiating a payment plan

Heathrow2020

Hello All

I’m a first-time poster - please bear with me.

I am in quite substantial debt.  Although I am managing it, I am suddenly in a bit of a pickle and would really appreciate your thoughts on my situation.

My Debt Story:

I’d like to think I did not get into debt foolishly but some may disagree - I did not spend it all on living the high life or a wild and foolish life anyway...  My parents died tragically in a car crash leaving just a myself + a sibling.  My sibling’s husband died soon after - tragically + unexpectedly.  Unfortunately, this had a detrimental effect on my sister - she got to spending wildly and recklessly, was in huge debt and it finally culminated in a situation where she misappropriated funds from a business partner/venture.  Long story short - I agreed to reimburse her business partner to avoid her being taken to jail and possibly her 2 young kids (my nieces) going into care.

I have a difficult relationship with my sister now - we do not talk + I do not expect her to ever pay me back.  That said, she is a good parent and I adore my nieces and still believe this decision was for the best as far as her kids are concerned.  I used a combination of credit cards and loan to bail her out.  I also had to take out a loan for my own private medical bills.

This was back in 2017, I was paying off the debt nicely and would have been completely debt free in September 2021 but Covid struck and I lost my job and I had no savings so had to cut down my repayments to the minimum.

I have not missed any repayments but I had no savings so the past 9 months have been a real struggle.  I have had to shuffle BTs and MTs on various credit cards to survive through corona/lockdown.  I now have a new job so I have increased my repayments and I am aiming to be free of this wretched debt by December 2022 - possibly sooner...

However, I am now faced with a new debt to HMRC and I need help on how best to tackle this alongside my existing debt.

I owe HMRC approx £37,000 which is made up of a combination of Corporation Tax, VAT and Self Assessment (I was contracting through a limited company - I am part of the excluded that did not have any corona help from the government). I am now on PAYE + will dissolve my company as soon as I pay off my corporation tax and vat so won’t have this issue again after I pay off HMRC.

As said, my current debts are manageable and I should be free of existing debt in 2 years.

My problem is I simply cannot afford to pay HMRC the full amount in one go. I have between £500 - £750 a month spare cash after I have paid all my bills/debts to allocate to my HMRC debt.  I would also need a payment plan of longer than 12 months which HMRC say they only do in exceptional circumstances.

My questions: 

1. Does anyone have experience of negotiating a payment plan with HMRC for longer than 12 months?  I would be looking at around 3 - 4 years - is this realistic?

2. Am I better off reducing the payments on my existing debt to the minimum which would free-up an extra £500 or so a month for HMRC?  This would mean paying off HMRC in 2 years but my existing debt would instead run for 3-4 years.

3. As a last resort, I could use a MT card as part-payment - I do have a MT option on one CC - approx. £10,000.  I do not have any offers so it would mean an 18% interest if I went down this route. Is there any merit in trying to use this MT card first to reduce the overall tax bill before seeking a payment plan with HMRC?  I know the MSE mantra is do not consolidate and do not take out new debt to pay off existing debt but this is HMRC and is potentially the only way I could get within HMRC’s 12 month payment plan.

I am just a little confused on the best approach and hoping to gauge your thoughts on my tax debt situation.

Does anyone have any thoughts on the best approach? Thanks in advance.

Monthly take home income = £3500

Monthly outgoings:

Current debt repayment = £1300

Mortgage = 950

Bills etc. = 500 

Surplus = between £500 - £750

[Deleted User]

Heathrow2020 said:

Hello All

I’m a first-time poster - please bear with me.

I am in quite substantial debt.  Although I am managing it, I am suddenly in a bit of a pickle and would really appreciate your thoughts on my situation.

My Debt Story:

I’d like to think I did not get into debt foolishly but some may disagree - I did not spend it all on living the high life or a wild and foolish life anyway...  My parents died tragically in a car crash leaving just a myself + a sibling.  My sibling’s husband died soon after - tragically + unexpectedly.  Unfortunately, this had a detrimental effect on my sister - she got to spending wildly and recklessly, was in huge debt and it finally culminated in a situation where she misappropriated funds from a business partner/venture.  Long story short - I agreed to reimburse her business partner to avoid her being taken to jail and possibly her 2 young kids (my nieces) going into care.

I have a difficult relationship with my sister now - we do not talk + I do not expect her to ever pay me back.  That said, she is a good parent and I adore my nieces and still believe this decision was for the best as far as her kids are concerned.  I used a combination of credit cards and loan to bail her out.  I also had to take out a loan for my own private medical bills.

This was back in 2017, I was paying off the debt nicely and would have been completely debt free in September 2021 but Covid struck and I lost my job and I had no savings so had to cut down my repayments to the minimum.

I have not missed any repayments but I had no savings so the past 9 months have been a real struggle.  I have had to shuffle BTs and MTs on various credit cards to survive through corona/lockdown.  I now have a new job so I have increased my repayments and I am aiming to be free of this wretched debt by December 2022 - possibly sooner...

However, I am now faced with a new debt to HMRC and I need help on how best to tackle this alongside my existing debt.

I owe HMRC approx £37,000 which is made up of a combination of Corporation Tax, VAT and Self Assessment (I was contracting through a limited company - I am part of the excluded that did not have any corona help from the government). I am now on PAYE + will dissolve my company as soon as I pay off my corporation tax and vat so won’t have this issue again after I pay off HMRC.

As said, my current debts are manageable and I should be free of existing debt in 2 years.

My problem is I simply cannot afford to pay HMRC the full amount in one go. I have between £500 - £750 a month spare cash after I have paid all my bills/debts to allocate to my HMRC debt.  I would also need a payment plan of longer than 12 months which HMRC say they only do in exceptional circumstances.

My questions: 

1. Does anyone have experience of negotiating a payment plan with HMRC for longer than 12 months?  I would be looking at around 3 - 4 years - is this realistic?

2. Am I better off reducing the payments on my existing debt to the minimum which would free-up an extra £500 or so a month for HMRC?  This would mean paying off HMRC in 2 years but my existing debt would instead run for 3-4 years.

3. As a last resort, I could use a MT card as part-payment - I do have a MT option on one CC - approx. £10,000.  I do not have any offers so it would mean an 18% interest if I went down this route. Is there any merit in trying to use this MT card first to reduce the overall tax bill before seeking a payment plan with HMRC?  I know the MSE mantra is do not consolidate and do not take out new debt to pay off existing debt but this is HMRC and is potentially the only way I could get within HMRC’s 12 month payment plan.

I am just a little confused on the best approach and hoping to gauge your thoughts on my tax debt situation.

Does anyone have any thoughts on the best approach? Thanks in advance.

Monthly take home income = £3500

Monthly outgoings:

Current debt repayment = £1300

Mortgage = 950

Bills etc. = 500 

Surplus = between £500 - £750

Your unsecured loans and credit cards are not priority debts whereas as HMRC is a priority creditor.  I don’t think 3-4 years time to pay is a realistic time to pay £37k to HMRC not when you could repay sooner by defaulting on your unsecured debts. 

We really need to see a full statement of affairs to give any meaningful advice. 

https://www.stoozing.com/soa.php

Joeisaware539

HMRC ltd company debt is that of ltd company. Providing you’ve not done anything fraud  wise e.g. illegal dividends, the VAT and CT will die with the company. It’s NOT YOURS - the self assessment is only. 

”Sponge-bob plan Google it” focus on your self assessment only.  

Joeisaware539

Merry Christmas I hope this helps. 

[Deleted User]

Joeisaware539 said:

HMRC ltd company debt is that of ltd company. Providing you’ve not done anything fraud  wise e.g. illegal dividends, the VAT and CT will die with the company. It’s NOT YOURS - the self assessment is only. 

”Sponge-bob plan Google it” focus on your self assessment only.  

The "Sponge Bob Plan" is on par with the 3 letter process.

Joeisaware539

Lover_of_Lycra said:

Joeisaware539 said:

HMRC ltd company debt is that of ltd company. Providing you’ve not done anything fraud  wise e.g. illegal dividends, the VAT and CT will die with the company. It’s NOT YOURS - the self assessment is only. 

”Sponge-bob plan Google it” focus on your self assessment only.  

The "Sponge Bob Plan" is on par with the 3 letter process.

Yes, it would benefit him and let him legally escape VAT & CT. 

The self assessment needs to be paid as personal. 

Mrs_Ryan

You can go longer than 12 months on SA. They also cannot tell you to default on personal credit debts to pay them so please ignore Lover_of_Lycra telling you to default on personal credit debts in order to pay! 

How much is the SA debt just out of interest? SA is the only one I know anything about, I can’t speak for VAT or CT but I do know it would be separate payment plans. 

[Deleted User]

Mrs_Ryan said:

You can go longer than 12 months on SA. They also cannot tell you to default on personal credit debts to pay them so please ignore Lover_of_Lycra telling you to default on personal credit debts in order to pay! 

How much is the SA debt just out of interest? SA is the only one I know anything about, I can’t speak for VAT or CT but I do know it would be separate payment plans. 

Charming!  HMRC might not explicitly tell someone to default on non-priority debts but they can set up a Time To Pay plan such that you have no choice but to default on something and then it's a toss up between defaulting on non-priority debts or defaulting HMRC and them moving to bankruptcy.  I know because I have seen this happen to more than one person.

HMRC say you can set up a payment plan to spread the cost of your latest Self Assessment bill if:

• you owe £30,000 or less
• you do not have any other payment plans or debts with HMRC
• your tax returns are up to date
• it’s less than 60 days after the payment deadline

@Heathrow2020 have you contacted Business Debtline?  They are a debt charity who give free advice to those with small business or who are self-employed.

https://businessdebtline.org

Mrs_Ryan

Hmmm- still not strictly true really. If it’s been done properly then that shouldn’t happen. That’s probably down to overestimating what can be paid by the customer or it not being done properly by the person setting up the plan which is a bit naughty. 

It is quite possible to have payment plans with say Tax Credits and SA though. I’ve not heard that one before. 

[Deleted User]

Mrs_Ryan said:

Hmmm- still not strictly true really. If it’s been done properly then that shouldn’t happen. That’s probably down to overestimating what can be paid by the customer or it not being done properly by the person setting up the plan which is a bit naughty. 

It is quite possible to have payment plans with say Tax Credits and SA though. I’ve not heard that one before. 

Not strictly true according to you even though I’ve seen it done numerous times. That was after a full list of income and expenditure had been sent to HMRC and HMRC came up with the repayment plan.  HMRC don’t allow people to drag things out for years and years. It’s not like offering £1 a month to a credit card company. HMRC can and will make people bankrupt. I’ve even seen letters from HMRC telling people to remortgage their homes to release equity to pay SA debts. 

Mrs_Ryan

Those letters have changed now after the expose in the Times. It’s behind a paywall but there’s quotes from HMRC saying they’re going to scrap all that. 

I’m not saying it’s not done but HMRC don’t make people bankrupt for a couple of hundred quid. Bankruptcy proceedings are generally the result of long term very high value debt. This is the reason I’m asking what the debt actually is.