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Can I challenge HMRC’s demand for payment? Jessica Williams for The Financial Times

Posted on 30 January 2024

Managing Associate Jessica Williams has appeared in the 'Your Questions' section of The Financial Times, discussing how business owners can respond to statutory demands for payments from HMRC.

She was asked by a reader: "HM Revenue & Customs has decided that my business owes a large amount of additional tax. I don’t agree and have not paid. Now the tax authority has served a statutory demand for payment on the company. What does this mean and what should I do about it?"

In response, Jessica commented: "A company has 21 days from the date that the statutory demand was served to make a payment or agree a repayment plan with HMRC. Or to prove that the debt is not due and owing or obtain a court injunction restraining HMRC from presenting a winding up petition against the company.

"Such injunctions are typically urgent and costly. If you do not take any of these steps (or cannot reach an agreement with HMRC to pause enforcement action), it will be open to the tax authority to commence proceedings against you, seeking to wind up the company. HMRC has shown repeatedly that if it is ignored it will follow through with winding up proceedings.

"If you go down the injunction route, the application must be supported by a witness statement, setting out in detail how the debt is disputed, and demonstrating to the court that HMRC should not be allowed to proceed with a winding-up petition. The application will be listed for hearing, and both HMRC and the company will be entitled to make representations. If your application is unsuccessful, HMRC will then be allowed to commence winding up proceedings against the company.

"We have three top tips for dealing with such instances. First, engage in correspondence with HMRC early — if you need a Time To Pay arrangement, the authority is more likely to be open to this request if you approach it early with a suggestion for payment down of any debts due. It is best not to wait until HMRC is knocking on your door with a statutory demand.

"Second, if you do not agree with a tax bill, be sure to put your dispute in writing to HMRC at the earliest possible opportunity. Then, follow up — repeatedly if needed — to ensure your dispute is being looked at and dealt with. Do not assume, just because your letter has been sent, that HMRC is reviewing your case and it will not take further steps.

"Finally, seek legal advice. If you are in any doubt as to your position, seek advice from a tax disputes or insolvency lawyer (preferably choose a law firm that has both capabilities). These matters can be complex. Input at an early stage can help resolve matters without the need for costly court procedures."

Please note, the opinions in this feature are intended for general information purposes only and should not be used as a substitute for professional advice.

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