Receiving a tax demand
HM Revenue & Customs can issue a tax demand (known as a statement of account) at any time during the year. Any statement issued will request immediate payment. The following sections describe what you must do.
Keep calm
It is possible the demand could contain threats of legal action. If you act promptly HM Revenue & Customs will probably be reasonable and, if the demand is small, you may be able to arrange for payment to be made over a period of time. Some people fear that failure to pay a tax demand on time can lead to imprisonment; however this is extremely unusual and will not occur unless you are dishonest, or if you neglect to attend a court hearing.
Do not ignore the demand
HM Revenue & Customs understands that some taxpayers may have difficulties in paying their tax bills, due to personal circumstances. If this is the case, you should not ignore the demand but should instead inform HM Revenue & Customs of your situation by letter or telephone.
Check the demand
Before you arrange payment of the demand you should check it. HM Revenue & Customs makes mistakes the same as anyone else. If you disagree with the figures, you should telephone the office that issued the demand and ask them to explain how they arrived at the tax due. If an error has arisen on their part they should amend your records and issue a revised demand.
Estimated demands
Many tax demands are based upon estimated figures. The Revenue has powers to make estimates where it has not received information from the taxpayer, and quite often it will assume levels of income or gains that are much higher than the amount actually received. In such cases there are a number of ways of getting the demand reduced, but you will need to act quickly and may need professional advice. This may involve making late appeals, submitting late tax returns, or applying for concessional treatment known as 'equitable liability'.
Payment over time
The Revenue normally requires the tax liabilities to be cleared within three to six months. In certain circumstances they may allow the amount to be paid over a longer period. However, interest will be charged on the outstanding balance until it is cleared in full.
It will help negotiations if you deal with all letters promptly and make some payments during negotiations as a sign of good faith. If your tax arrears relate to income from employment or a pension, you may ask the Revenue to collect the debt by changing your PAYE tax code.
This page was last reviewed on 03 April 2006. The information may not reflect changes in legislation made after this date.
This is only a guide to your tax position and should not be relied on in place of professional accounting or tax advice. Any calculated figures are illustrative and are based on the data you provided.
