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HMRC to increase the use of Charging Orders for unpaid tax

20th Mar 2013
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Hidden behind the headlines from George Osborne’s budget statement today is a toughening stance by HM Revenue & Customs (HMRC) on unpaid tax.

In future they will make more use of Charging Orders for unpaid tax bills. This could impact on many consumers as well as the self-employed who have outstanding tax bills.

When a debtor – in this case somebody who has an unpaid tax bill – is not able to pay, HMRC may apply to the county court for a County Court Judgement (CCJ).

The issue of a CCJ confirms the validity of the debt and, if it remains unpaid, opens a variety of enforcement actions to enable a creditor to try to recover the debt. One option available is a Charging Order.

If the debtor fails to stick to the terms of the CCJ the creditor can apply to secure the debt against the debtor’s home. This is similar in nature to adding an extra mortgage to the property.

Under a charging order, any outstanding debt is repaid when the house is eventually sold. Creditors cannot force the sale of a property – known as a ‘sale order’ – unless they obtain the agreement of a judge.

This reinforces the importance of not ignoring tax arrears or other debts when they fall due.

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