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Tax Debts – Can’t Pay or Won’t Pay?

Monday, August 1st, 2011

Mark McLaughlin looks at how HM Revenue & Customs handles requests by taxpayers for more time to pay their tax bills.

Taxpayers who do not pay their tax liabilities on time fall into two categories – those who ‘can’t pay’, and those who ‘won’t pay’. At least that seems to be the view of HM Revenue and Customs (HMRC). What difference does it make which category you fall into if you have tax debts? The answer is – quite a bit!

Tax law states the dates on which tax becomes due and payable. HMRC’s basic position is that tax is payable when it falls due. Whilst the tax legislation does allow certain tax liabilities to be paid by instalments, those instances are rare. In all other cases, it is understandable (although perhaps unrealistic in the present economic climate) that HMRC expects all taxpayers to ‘pay up’ in full, and on time. Failure to do so has repercussions, in terms of possible interest and penalty charges.

HMRC generally discourages taxpayers from paying their tax liabilities late. After all, to do otherwise would be encouraging taxpayers to break the law! However, whilst the ‘official line’ is to enforce the law, in practice HMRC will consider requests from taxpayers (or their agents) for time to pay outstanding tax liabilities.

It’s official

How HMRC reacts to requests for ‘time to pay’ will probably depend on whether it considers that the taxpayer ‘can’t pay’ or ‘won’t pay’. HMRC defines both of these categories in their guidance manual for its staff, the ‘Debt Management and Banking Manual’ which can be accessed on HMRC’s website: (www.hmrc.gov.uk/manuals/dmbmanual/). HMRC states the following under the heading ‘Can the customer pay?’

  • “‘Can’t Pay’ is defined as the customer who wants to make payment, but currently doesn’t have the means to do so.

 

 

What next?

HMRC’s approach to a request for time to pay will depend upon which category the taxpayer has been placed into. HMRC also states:

“Where the customer clearly shows that they ‘can’t pay’ as opposed to a ‘won’t pay’, our aim is to negotiate a payment arrangement that allows them to clear their debt and helps them to make future payments on time, where this is realistically possible. Where someone can’t pay and their best proposals show that they can’t afford to meet future liabilities then we cannot allow [time to pay].”

However, taxpayers placed in the ‘won’t pay’ category can generally expect a harder time. HMRC guidance indicates that time to pay requests will be refused, and enforcement action will be started as soon as possible.    

Putting things right

The problem with this ‘can’t pay’ or ‘won’t pay’ approach is that it is rather simplistic, which could result in HMRC placing taxpayers into the ‘won’t pay’ category in error. This could have unfortunate consequences for taxpayers who would ordinarily pay their tax bills on time, but are genuinely unable to do so at the present time. What can be done if this happens to you?

Taxpayers (or preferably agents with experience in this area) should contact HMRC’s Debt and Banking Directorate, and speak to the person dealing with the time to pay request. It is important to clearly explain the taxpayer’s financial difficulties, what is being done to resolve the position, and his or her ability to meet the time to pay proposal. It would probably also help to emphasise the taxpayer’s intentions to clear all future tax liabilities on time.

If the HMRC debt management official is unwilling or unable to move the case from ‘won’t pay’ to ‘can’t pay’, be prepared to take the case to a higher level, by asking to speak to a more senior HMRC officer.

One step ahead

Of course, prevention is better than cure. By contacting HMRC and asking for time to pay before the tax becomes due and payable, it should be possible to avoid being categorised as a ‘won’t pay’ case by mistake. In its online publication for taxpayer agents (‘Working Together’ Issue 43, May 2011), HMRC offers the following advice: (www.hmrc.gov.uk/agents/working-together-43.pdf):

“We understand that some of your clients may find themselves in financial difficulty and worry that they won’t be able to meet their tax obligations. If they are in this position, the important thing is that they – or you, as their agent – contact us straight away – before payment is due, so that we can help. The support we can offer (for example – offering an installment arrangement) will be judged according to the particular circumstances of each case.”

So stay one step ahead – if you are having temporary financial difficulties and are unlikely to pay your next tax bill on time, contact HMRC and ask for extra time to pay before the due and payable date – or better still, get a tax professional to do it for you. It could save you more time and trouble later on.  

Mark McLaughlin CTA (Fellow) ATT TEP is a consultant to Tax Debts Ltd, a debt management service for UK taxpayers (www.taxdebts.co.uk).

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Personal Debt Levels Rise As Families Increase Credit Card Spending

Friday, July 1st, 2011

There are many people drowning in debt at the moment, in the wake of the recent economic downturn, but increased spending on plastic remains the top cause of financial crisis among this generation.

New research conducted by Moneysupermarket.com has revealed that 1/3 of British consumers have increased their arrears on unsecured forms of credit (such as credit cards and store cards) within the last year. This brings the average UK personal debt up to £8,430, without considering any outstanding mortgages.

These results come after the Aviva Family Finances Report discovered that the typical household debt in the United Kingdom stands at £5,878, which is £500 more than it was in January 2011.

Paying for everyday items such as food shopping and utilities using a credit card may seem convenient at the time, but it could lead to dire financial consequences for if the balance is not cleared at the end of the month. Interest rates on credit cards can be extremely high, and leaving a balance for even just a few months can cause debts to spiral out of control.

A growing number of people with an outstanding balance on a credit card are only making the minimum repayments each month and some people are even in arrangements with their lenders to only make tiny contributions to their debt every month, sometimes as little as £1 per month.

Recently, credit card firms have hiked their interest rates to the highest level they have been for 13 years in an attempt to recover losses made during the PPI scandal last month.

Paying the bare minimum on credit cards often leads to consumers paying back considerably more money than they originally borrowed, in the long term.

With the Bank of England base rate resting at 0.5%, now is the best time to try to clear any outstanding debts before it rises, along with interest rates on loans and credit cards.

If you are struggling with any loans, credit cards or mortgages, call Sterling Green on 0800 283 2827.

Written by Katie Simpson

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Posted in Debt Consolidation & Re-Mortgages, Debt Management, Loans, News & Features | No Comments »

British Teens Have Unrealistic Expectations About Future Finances

Wednesday, May 25th, 2011

New research has shown that teenagers in the U.K. expect to be earning over £61,700 per year by the time they’re 35 years old.

The survey conducted by The MoneySense Panel revealed that British teenagers have a very unrealistic forecast of their future financial situation. Currently, the national average salary for 30-39 year olds is approximately £24,333.

The research also discovered that young people between the ages of 13-19 expect they will be homeowners before they reach their 25th birthday. However, the reality is very different. Just 1/5 of all first time buyers within the last 5 years have been under the age of 25. This proves that the youth of today need better financial education and need to be made aware of the current economic climate.

Many teens were shown to be already worrying about their finances and a high percentage anticipated being in debt in years to come. As the number of debt worries among young people rises, the number of teenagers earning their own money has fallen. Nowadays, less young people are working a part time job while they study at school or college than in previous years.

These results show that youngsters are concerned about their finances but it also highlights the massive difference between the way teens anticipate their financial future, and the probability of realising a £61,700 salary before they reach 35.

A good way to benefit from this information is to use it to better educate school children about money matters and setting realistic goals for the future. By teaching good money management skills in schools, we can greatly aid these young people in making sensible financial decisions that will minimise the risk of unmanageable debt in the future.

Many young people would benefit from good financial management skills which will enable them to achieve a goal that will enrich their future life, such as paying for driving lessons, saving for a university degree or budgeting so they can place a deposit on a house.

The study, which spanned 5 years, also revealed positive changes in teenagers’ attitude to their finances. 65% of young people believe they had better money saving skills than they did in 2010 and many of these teens are monitoring their money closely in light of the recession.

Almost 83% of the youngsters surveyed said that they had learned new things about money management either at school or from their parents and 2/3 took an interest in their parents’ household finances.

On the whole, this proves that young people are becoming more skilled in the art of financial management and hopefully this useful information can continue in schools and colleges and prove lifesaving for them in the future.

If you are over the age of 18 and are struggling to repay any debts, whether you have credit cards, personal loans or a mortgage, Sterling Green can help find the best solution for you and bring you relief.

Call us free on 0800 083 2827 today.

Written By Katie Simpson

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Posted in Debt Consolidation & Re-Mortgages, Debt Management, Loans, News & Features | No Comments »

Millions to Gain as Banks Surrender Against Legal PPI Battle

Wednesday, May 11th, 2011

It is predicted that over 3 million people will receive compensation after several top banks dropped their legal fight against mis-sold Payment Protection Insurance (PPI).

British banks are expected to pay out £9 billion in compensation and legal costs in what is being named as the biggest mis-selling scandal in U.K. history. But as so many complaints have been received, PPI consumers will likely have to wait some time before recovering any monetary compensation.

The job of a PPI policy is to cover loan repayments in case of accident, injury or job loss.

On 9th May 2011, the British Bankers’ Association revealed it would not be appealing against the case at High Court which it lost, against allegations of the mis-selling of PPI policies to banking clients. New PPI guidelines are set to be put into place to prevent this in future.

Lloyds bank is ceasing further legal action and has announced it has set aside around £3.2 billion to compensate their customers.

 Also deciding to give up the court battle are Barclays, who have set aside £1 billion to cover costs and HSBC, who expect to pay out around £270 million.

Many firms are now getting the ball rolling in regards to their clients’ PPI claims, now that the legal fight is over and some companies are actively seeking out PPI customers to inform them of their right to monetary compensation.

All in all, this is great news for consumers who have been paying out each month for insurance they either didn’t qualify for, or never agreed to pay for. Now they can receive the compensation they deserve.

 If you think you may qualify for help with a PPI claim, call Sterling Green on 0800 083 2827 and speak to one of our experienced advisers.

Written by Katie Simpson

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Housing Market Showing No Sign Of Recovery As Record Number Of Mortgage Holders Default

Wednesday, April 27th, 2011

As house prices rise at the moment, consumers are seeing their confidence plummet as a result. The Bank Of England has predicted that more and more homeowners will struggle to pay their mortgage each month in the aftermath of the price hike.

The bank revealed that between January and March, lenders claim that there had been a huge growth in the number of people unable to find the money to cover their repayments on their properties and had been forced to default on their monthly payments. They have seen a huge rise compared to 2010 figures and they expect that the problem will continue to escalate throughout 2011.

Interest rates have rested at the low base rate of 0.5% for the last 2 years but banking officials say that it won’t last long and we can expect to see a significant rise in interest rates within the next few months.

Banking giants Nationwide concluded that the average homeowner has a mortgage of £78,000 and repays £455 per month at an interest rate of 2.71%, significantly higher than the current base rate of 0.5%. This in the long run, equates to thousands of pounds of expenditure for the average borrower.

Potentially, if the interest rates go back to pre-recession levels, a monthly fee of £455 would become a staggering £621 per month, meaning a colossal decrease in disposable income for millions of people.

Together with the increase in VAT and rising bills, the financial crisis has seen Britons’ disposable income drop for the first time in 30 years, as people’s wages stay the same, yet the cost of living has skyrocketed. This has resulted in people being unable to cover the cost of inflation and soaring bills.

Nationwide has warned that the housing market is showing no signs of recovery yet, a devastating blow to mortgage holders.

If you are struggling to meet your mortgage payments, Sterling Green can help.

We offer a bespoke remortgaging service where our experienced professionals will find the best deal out there that suits your circumstances. We negotiate on your behalf to secure you the best financial future so you can have peace of mind.

For more information contact us for a free evaluation on 0800 083 2827.

Written by Katie Simpson

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Posted in Debt Consolidation & Re-Mortgages, News & Features | No Comments »

10% Of Male Pensioners Retire With Debts Of Over £50,000

Wednesday, February 2nd, 2011

According to new research, one in ten men who plan to retire this year will do so with personal debts of over £50,000.

Overall, 1 in 5 retired homeowners are still paying off a mortgage. Research conducted by Scottish Widows UK found that on average, they each owed £38,000.

This further shows that the recession and the current poor economic climate has affected everybody and continues to prove detrimental to people’s ability to pay off their debts, let alone save any money toward their retirement.

Pensioners have seen the biggest increase out of any age group in bankruptcy cases over the last 10 years.  Figures released from the Insolvency Service showed that in 2000, just 309 men over the age of 65 were declared bankrupt. In 2009, there were 1,756, which was a six-fold increase.

Insurance company Prudential gathered data from 10,000 clients which found that 20% of people who plan to retire in 2011 will do so with a degree of personal debts, including mortgage debts, credit card balances and also money outstanding on personal loans and store cards.

The shocking revelation that one in 10 men who plan to retire this year will have debts of more than £50,000 shows how much interest rates can financially cripple people for years, well into their 60s and 70s. The survey found that there is a difference between the level of personal debt of men and women. Only 2% of women hold debts of the same magnitude at retirement age, proving that men borrow more money in their lifetime than women do and have poorer money management skills than their female counterparts.  

 Prudential also asked pensioners who had debts how they would cope with the repayments into their later years. The most popular response was that they would seek employment past retirement age if the repayments became too much of a strain. They also found more extreme responses such as selling the family home in favour of cheaper accommodation, releasing equity in their homes, selling assets and even relying on family and friends for financial support.

This is especially worrying as older people tend to have more difficulty in finding suitable employment, and also jobs are scarce in the wake of the recession, which has seen many businesses forced to cut employees’ working hours and make job cuts in order to stay afloat.

If you or someone you know is struggling with any form of debt, help is at hand in the form of a debt management plan, tax payment plan or remortgage.

Call Sterling Green to speak to one of our experienced advisers today on 0800 083 2827.

Written by Katie Simpson

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Posted in Debt Consolidation & Re-Mortgages, Debt Management, Loans, News & Features, Tax Debts | No Comments »

Brits Only Worry About Debt When They Owe £16,000

Wednesday, January 19th, 2011

According to new statistics, the average British citizen won’t worry about their level of personal debt until they owe more than £15,837.

The survey, commissioned by life insurance firm Scottish Provident revealed that people would not generally be concerned about outstanding balances on loans and credit cards until they owed almost £16,000. Only then would they begin to consider that they may have a problem paying back the money and may consider seeking help.

It also discovered that the younger generations are even less inclined to view debts as a problem, with young people reaching an average debt amount of £16,646 before they break a sweat.

Scottish Provident said the figures were a worrying indication of how acceptable debt has become to people. In this day and age, it is the norm to have some form of credit, whereas having financial difficulties was taboo in the past. In fact, so many young people have grown up surrounded by family who use credit on a day to day basis, that they are unconcerned about using credit cards and loans themselves. This revelation is somewhat worrying. Because youngsters not fearing financial difficulty, coupled with the fact that credit is readily available for anyone over the age of 18, the chances of these young people being solvent in the future are significantly lower than that of young people 10 years ago.

Currently, personal insolvency numbers have almost hit record levels due to more and more people finding they are unable to cope with their mounting debts.

With the current economic climate and the recent VAT increase, which means good cost more than they did last year, increasing numbers of British citizens are experiencing financial difficulty and are unable to keep up with minimum payments on credit cards and personal loans.

The research conducted by Opinium Research also revealed that people were unprepared for financial emergencies, with 62 per cent admitting they would need to turn to family for help if they were unable to work for any reason. This is a huge concern considering the volume of jobs that have been cut in recent months due to the recession and many people have experienced a pay cut or a loss of working hours as businesses struggle to cope with the economic downturn.

If you are struggling with any debts, or think you may struggle in the future, Sterling Green can help. We offer a range of financial products and our experienced advisors are here to help you find the best solution to suit your personal circumstances.

For a free consultation call us on 0800 083 2827.

Written by Katie Simpson

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Posted in Bankruptcy, Debt Consolidation & Re-Mortgages, Debt Management, Loans, News & Features, Tax Debts | No Comments »

Women Worst Hit By Recession

Wednesday, December 8th, 2010

 Women are being hit the hardest by Britain’s economic meltdown, figures have revealed.

The number being plunged into insolvency in just one year has soared to an all-time record of nearly 65,000, a staggering 175 a day.

The study conducted by the Government’s Insolvency Service discovered that women are being hit almost 3 times harder by the recession than their male counterparts.

Female insolvency figures rose by a huge 22% compared to figures from last year. In comparison, the insolvency figure for males rose by 8%. This goes to show that females are much more affected by the economic downturn than men are at the present date.

Financial experts have concluded that the most prominent reason for this stark difference in figures is that women are attempting to maintain a celebrity lifestyle despite the credit crisis and the poor economic state at the moment.

Some extreme cases that experts have seen are women who try to emulate the popular ‘WAG’ lifestyle by living way beyond their means. These women spend vast amounts of money on credit cards, store cards and even take out personal loans to fund their lavish lifestyles, leaving many in financial dire straits.

People who are classed as being in ‘extreme debt’ have a debt-to-income ratio of more than 66:1. This means that effectively, individuals are spending more than 66 times their annual salary every year.

Records show that there are 64,035 insolvent women at the present time, and of these, just over 45,000 are aged between 25 and 49. This is a large percentage of the figures that young and middle aged women account for.

Furthermore, according to the Office for National Statistics, over 1 million women are currently unemployed in Britain. This statistic is the highest in 17 years, and experts warn the situation is set to deteriorate in the coming years. Shockingly, economists predict that the number of unemployed women is set to rise dramatically by 2012, to 2.2 million.

The Consumer Credit Counseling Service said the majority of its clients declaring bankruptcy are female. The top reasons include living beyond their means, closely followed by the break down of a relationship, loss of earnings and serious illness.

In conclusion, the recent figures surrounding bankruptcy clearly show that women are in more danger of financial meltdown than men. Women must protect themselves by cutting back on lavish spending in order to avoid bankruptcy in the future. Shopping in cheaper stores, holidaying close to home, and even cutting out a morning coffee can all contribute greatly to ensuring financial security in the future. These cutbacks also teach valuable budgeting skills which will give these women the right start in disciplining themselves financially.

If you feel you are struggling to pay any debts, whether it be credit cards, store cards, personal loans or even a mortgage, Sterling Green can help. We offer a range of financial solutions to help you recover from the recession. We offer debt management plans, tax management programs and even a re-mortgaging service.

Our team of experienced advisers are committed to finding the best solution for you. For a free consultation call us free on 0800 083 2827.

Written by Katie Simpson

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Posted in Bankruptcy, Debt Consolidation & Re-Mortgages, Debt Management, Loans, News & Features, Tax Debts | No Comments »

Millions Can’t Afford To Retire

Wednesday, December 1st, 2010

A massive 4.5 million people over 50 years old expect to work beyond the state retirement age according to new research conducted by insurance and retirement firm LV.

The study found that more than half of over-50s expect to work up to 5 years beyond retirement, more than ¼ expect to work 5-10 years past retirement and 20% believe they will be working past the age of 80.

Furthermore, the survey revealed that almost twice as many women (66%) than men (34%) expect to be working well past retirement age.

Recently, the new Coalition Government announced that the state retirement age is set to rise from 60 for women and 65 for men, to age 66 for both genders by 2020.

LV found that 66% (almost 2.5 million) of late retirees will continue to work because they cannot afford to retire and would not be able to survive on the reduced income of a state pension.

Last year, due to the recession, many people had to decrease their pension payments because the cost of living rose. Among the over-50s, the total pension reduction reached almost £18 billion.

The research also revealed that a fifth of retirees have returned to work because their monthly pension didn’t cover their living costs. 4% of people who had previously retired returned to work full-time, 10% went part-time and 6% took on unpaid or voluntary work. Of the people who did not return to work following retirement, over 1/3 admitted they missed going to work and found it difficult to survive on a state pension.

In another shocking revelation, 16% of people of retirement age are working more hours than they did before their 50th birthday in an attempt to boost their savings.

When the subject of the Government’s imminent spending cuts was risen, a huge 40% of over- 50s expressed concern for their future savings and expect to have a low income during retirement. Only 2% of pensioners thought they would be better off after the spending cuts. 

This shows that citizens of pensionable age are really worrying about their future quality of life due to the economic downturn and the upcoming Government cuts which will no doubt affect pensioners and force many into continuing to work, when they would otherwise retire.

Many people of pensionable age are finding it impossible to cover all their bills each month on current wages, let alone a reduced pension. Many over-50s are still paying off a mortgage and various other debts. Crippling charges on credit cards and personal loans exacerbate the situation and leave older citizens with no choice but to continue working in order to meet repayments.

 If you feel your debts are a problem, or could become a problem in the future, Sterling Green can help. Debt management plans offer an easy way to manage your debt. We communicate with your creditors on your behalf and negotiate for your interest to be frozen so you can focus on saving money and can enjoying your retirement that bit earlier.

 Call us free on 0800 083 2827 to find out how we can help you.

Written by Katie Simpson

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Posted in Debt Consolidation & Re-Mortgages, Debt Management, Loans, News & Features, Tax Debts | No Comments »

Consumers Risk Interest Rate Of 46,450,869% By Going Overdrawn

Wednesday, November 24th, 2010

Every year, millions of people in Britain exceed their agreed overdraft limit during the festive period.

Consumers who plan on going overdrawn at the bank this Christmas will face staggering interest charges. Some people will be charged a shocking 46,450,869% APR for using an unauthorised overdraft.

Almost everyone has needed to use a form of credit at some point in their lives, to cover an urgent bill. But, as tempting as it might be to hand over a credit card or dip into an overdraft in order to cover the expense of gifts, decorations and food over the festive period, the true cost could prove to be very dear for months, or even years to come.

A recent study conducted by Money Mail revealed that the annual interest charge on an unauthorised overdraft with a bank can be equivalent to more than 46 million per cent, depending which bank the overdraft was borrowed from. 

Withdrawing more money than you have in your bank account can be very detrimental to your future financial security. Many people are finding that the huge fees that are charged by banks as a result of unauthorised borrowing, are forcing them into a financial crisis. They are unable to pay off the interest that they have accrued and in turn, utility bills and general expenses are proving unaffordable.

A lot of people who have found themselves drowning in debt due to interest charges and mounting bank fees have turned to risky borrowing in the form of payday loans. A study by Consumer Focus discovered that every year, 1.2 million Brits use payday loan companies as opposed to taking a loan out with a bank because they are afraid of being hit with steep charges.

These loans are intended to provide a short-term solution to financial strain and require repayment in full at the end of the month, including interest charges.

If you find yourself struggling with monthly repayments or juggling several debts each month, Sterling Green offer advice and assistance with many forms of debt and can help take the weight off your shoulders. In the run up to Christmas, many people are worrying how they will be able to afford to stay financially afloat, but with our help you can regain control over your finances and have a stress-free Christmas.

For a free consultation call one of our experienced advisers on 0800 083 2827.

Written by Katie Simpson

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Posted in Debt Consolidation & Re-Mortgages, Debt Management, Loans, News & Features | No Comments »

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