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What could happen if you don’t pay HM Revenue & Customs

If you've received a bill from HM Revenue & Customs (HMRC) that you can't pay, it's important to contact them as soon as possible to try to come to an arrangement. If you don't, and your bill remains unpaid, HMRC will start proceedings to recover the money.

If you can’t pay your bill, you should talk to the HMRC office that sent you the latest communication if they agree that you really can’t pay, they’ll do what they can to help. They may give you extra time to pay possibly by instalments.

On this page:

What will happen if you ignore your bill

If you don't reach an agreement (or you don't keep up the payments you've agreed to make) HMRC has several options. These options may differ depending on where in the country you live. The first option will always be to try to come to an arrangement but failing that the following may occur (with distraint coming first and the other options following):

  • distraint
  • magistrates court proceedings (or sheriff court in Scotland)
  • county court proceedings (England and Wales only)
  • bankruptcy proceedings (England, Wales and Northern Ireland)
  • sequestration (Scotland only)
  • winding up your company

Information on what to do if you can’t pay your bill

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Failure to pay your bill England, Wales and Northern Ireland

Distraint

This is where most of your possessions (but not the basic things you need to live and the essential tools of your trade) can be taken and auctioned to pay your bill plus distraint costs.

Someone from HMRC will visit your home or business and ask you to pay your bill. If you don't pay, they will list your possessions on a form. If you sign it, they won't usually take anything away that day you'll have five days to pay. If you don't sign, you'll still have five days to pay but they will take your possessions there and then.

If your things are sold for more than you owe you'll get anything left over. If they're sold for less, you'll have to make up the difference.

Find out more about distraint proceedings (PDF 38K)

Get advice on distraint from Taxaid

Magistrates court proceedings

HMRC can start proceedings in a magistrates court if:

  • you owe £2,000 or less
  • you’ve owed it for no more than a year

You’ll get a summons before the hearing telling you what you owe and where and when the hearing will be.

If you pay what you owe you won’t have to go to court. If you disagree with the amount, contact HMRC magistrates can’t settle arguments about the size of your bill.

The magistrates can order you to pay your bill plus costs. If you don't, they can send bailiffs to take your possessions.

Read the factsheet on magistrates court proceedings in England and Wales (PDF 48K)

Read the factsheet on magistrates court proceedings in Northern Ireland (PDF 63K)

Find out more about magistrates court proceedings on the Taxaid website

County court proceedings England and Wales only

If HMRC can't collect the debt using distraint or through the magistrates court, they can start county court proceedings. You'll get a claim form and an information pack explaining your options.

If you pay what you owe the legal proceedings will stop. If you can't pay straight away, you can make an offer within 14 days to pay by a certain date or in instalments. If you disagree with the amount, you can say why on the form you get from the court. You may have to go to court to give your reasons.

If you don't reply or pay what you owe, you can be ordered to pay the bill plus court fees. Your details will be put on the Register of Judgments, Orders and Fines, after which you may find it difficult to open a bank account or borrow money. But if you pay within one month of the judgment you can ask to have the entry removed.

Read the factsheet about county court proceedings in England and Wales (PDF 45K)

Learn more about county court proceedings on the Taxaid website

Bankruptcy proceedings

If you don't pay HMRC or your debts exceed your assets, you could be bankrupted and lose your home, business, savings and investments. What will happen during a bankruptcy proceeding:

  • a statutory demand for payment will be served on you personally at your home
  • if within 21 days you don't pay or agree to settle a bankruptcy petition will be filed at the High Court
  • the petition will be served personally at your home
  • you'll need a solicitor they may be able to have the hearing adjourned to agree settlement terms
  • if you can't pay, the court can make a bankruptcy order
  • a trustee can be appointed to use your assets to pay bankruptcy costs and contribute towards your debts

Find out more about bankruptcy in the factsheet Form EF5 (PDF 42K)

Winding up your company England, Wales and Northern Ireland

If HMRC has gone through all the methods described earlier in this guide they will file a winding up petition in the High Court.

Your business will go into liquidation and the court will appoint a liquidator to wind up its affairs. The liquidator’s main aim will be to realise the company’s assets to pay its creditors.

Your company will then be dissolved and struck off the Register of Companies. Any money left will go to the shareholders.

Learn more about winding up a company in the factsheet Form EF6 (PDF K)

Learn more about winding up a company in Northern Ireland in the factsheet Form EF6NI (PDF 48K)

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Failure to pay your bill Scotland

Sheriff court

If you fail to pay what you owe HMRC they will apply to the sheriff court as soon as possible after the date of the demand letter for a warrant to collect debts owing to them.
You will have 14 calendar days in which to pay the debt after the warrant has been filed. If you still don’t pay the debt HMRC will:

  • take the money directly from your pay or bank account
  • take and sell goods that are within your business premises or kept on your property but outside your house, for example, in a garage
  • make you bankrupt (see the section below ‘Sequestration’)

Find out more about sheriff court proceedings in the factsheet Form EF4 (PDF 36K)

Sequestration

If you fail to pay debts owing to HMRC even after they have issued you a warrant through the sheriff court, they will start sequestration proceedings (bankruptcy in Scotland).
If you are sequestrated you cannot:

  • obtain credit for over £250 without declaring that you are an undischarged bankrupt
  • be a director or involved in the management of a company
  • hold certain public offices or professions

Sequestration lasts for three years, unless a trustee or a creditor asks the court to extend it.

Find out more about sequestration in Scotland in the factsheet Form EF5(S) (PDF 47K)

Winding up your company Scotland

If HMRC has gone through all of the methods described earlier in this guide they will file a winding up petition in court.

Your business will go into liquidation and the court will appoint a liquidator to wind up its affairs. The liquidator’s main aim will be to realise the company’s assets to pay its creditors.

The company will then be dissolved and struck off the Register of Companies.

Any money left will go to the shareholders.

Find out more about winding up your company in Scotland in the factsheet Form EF6(S) (PDF 49K)

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More useful links

Find information on what to do if you can’t pay your bill

Find out how to complain about an HMRC decision

Find out how to make an appeal against an HMRC decision

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