Taxpayers rack up £4bn HMRC bill

Those hardest hit are raiding their pensions and risking their homes to keep up unsustainable payments, writes Harry Brennan

Taxpayers have amassed £4bn of debt with HM Revenue & Customs as figures show a huge rise in people struggling to pay bills, Telegraph Money can disclose.

The amount of money moved on to HMRC’s Time To Pay payment plans, designed for people who cannot meet their tax bills on time, doubled over the first half of 2020, figures obtained through the Freedom of Information Act have shown.

Almost 650,000 people had asked to spread their payments by the end of June last year. Their unpaid debts totalled £6,400 on average.

For many on reduced incomes, the debts are unsustainable. Some have resorted to paying tax bills out of their pension pots or from savings set aside for mortgages. This has delayed retirements and put homes on the line.

Many will now be hit with interest charges of 2.6pc and will be facing arrears for months or years.

A further 25,000 people have asked for extra help paying £ 69m in unaffordable tax bills since October, when the tax authority made it easier to apply for credit – and the numbers are only expected to swell further.

Three million people face having to pay tax bills double the normal size by the Jan 31 deadline as bills already deferred from last year begin to pile up, according to accountants QuickBooks.

Events speaker Andrew Vorster, er, 55, from London, has deferred red a £5,000 HMRC bill over 12 months, ths, adding more than £400 to his monthly outgoings. The freelancer was forced to dip into his pension two days after he turned 55 last year to cover his day- to- day costs and has already burnt through money he had set aside to pay his mort- gage. He said he would struggle gle to keep the payments going as s the pandemic had left him with virtually no income for almost a year. Self- employed driving instructor John Dennison, 58, from Wolverhampton, has spread a £3,700 tax bill over 17 monthly instalments of £200 after social distancing rules forced him to stop working and left him unable to pay ay his tax t bill. He still has no income to co cover the cost, he said. Taxpayers who have previo ously filed tax returns late or in incurred penalties will not be abl able to spread their payments and will face fines that can snowb snowball into eye-watering sums if they f fail to pay on time. They may be forced to pay via credit cards to avoid p penalties, according to Jay Sang Sanghrajka of Price Bailey, anoth another accountancy firm. “If they can get an intere est-free deal, this may be viable. A company voluntary arrangement, or CVA, w which is a type of insolvency, migh might be a better option for company directors,” he said. “It allows taxpayers to agree reduced payments with creditors, including HMRC, and pay only a proportion of the debts due over a three to five-year period.” Personal insolvencies were 13.4pc higher in December than in the same month in 2019, while corporate insolvencies were up by 9pc, according to government figures. Pub landlord Liz Hind, 44, of the Old Millwrights Arms in Buckinghamshire, faces paying tens of thousands of pounds in deferred VAT relating to money made in 2019 this April, even though she lost thousands last year thanks to lockdown and money spent on making her business Covid-secure.

She said she expected a “car crash” in the new tax year, when she will be forced to pay up at the same time as the furlough scheme is due to end, along with the moratorium on evictions for unpaid rent.

HMRC has encouraged anyone struggling to pay to get in touch or apply for a payment plan online. It said it would take a lenient stance on the £100 automatic late filing penalty for people with “reasonable” pandemic- related excuses. However, the Government has so far rejected calls for the tax return deadline to be extended or fines to be waived altogether.