HMRC has issued a warning about fraudulent schemes claiming that Bills of Exchange and other private financial instruments can be used to settle UK tax liabilities.
These schemes are often promoted as legal alternatives to paying HMRC through its approved payment methods. However, HMRC has made it clear that these claims are false and that businesses using such arrangements could face significant financial consequences.
What Is Happening?
HMRC has identified promoters encouraging businesses and individuals to use private financial instruments instead of making genuine tax payments.
These instruments include:
- Bills of Exchange.
- Promissory Notes.
- Money Orders.
- Other similar documents marketed as alternatives to paying tax.
Promoters often claim that:
- The arrangements are lawful under the Bills of Exchange Act 1882.
- HMRC is legally required to accept these documents as payment.
- Tax debts can be reduced or eliminated by using these instruments.
HMRC has confirmed that these claims are incorrect. Tax liabilities must be paid using HMRC’s approved payment methods, and private financial instruments of this type do not settle tax debts.
Why Does This Matter?
Businesses or individuals who participate in these schemes may still be required to pay:
- The full amount of tax owed.
- Interest on late payments.
- Financial penalties.
- Debt collection costs.
- Additional enforcement action by HMRC.
In many cases, taxpayers also lose the fees paid to the scheme promoter, leaving them significantly worse off financially.
HMRC has also stated that the courts have consistently rejected arguments that Bills of Exchange and similar instruments discharge tax liabilities.
Example
A company owes £30,000 in PAYE and VAT.
A promoter persuades the directors to submit a “Bill of Exchange” instead of paying HMRC, claiming that the tax debt will be legally discharged.
HMRC rejects the document because it is not an approved payment method.
The company still owes the £30,000, while interest and penalties continue to accrue. In addition, the company may have paid substantial fees to the promoter for a scheme that provides no legal benefit.
Legitimate Options If You Cannot Pay
If your business is struggling to pay its tax liabilities, it is important to seek legitimate assistance rather than relying on schemes that promise unrealistic results.
HMRC may be able to agree a Time to Pay arrangement where appropriate, allowing tax to be paid by instalments while helping businesses remain compliant.
Seeking professional advice early can often prevent penalties and further financial difficulties.
How Business Management Consultation Can Help
At Business Management Consultation, we can help you:
- Verify whether a tax planning or payment arrangement is legitimate.
- Identify warning signs of tax avoidance or fraudulent schemes.
- Ensure taxes are paid using HMRC’s approved payment methods.
- Communicate directly with HMRC on your behalf.
- Negotiate Time to Pay arrangements where appropriate.
- Help your business remain compliant with UK tax legislation.
Obtaining independent professional advice before entering into any tax arrangement can help protect your business from unnecessary financial and legal risks.
Conclusion
Fraudulent schemes involving Bills of Exchange, Promissory Notes and similar financial instruments can expose businesses to significant costs, penalties and enforcement action. HMRC has made it clear that these documents are not accepted as payment for tax liabilities.
If you are experiencing difficulties paying your taxes, speak to a qualified adviser before taking action. Legitimate solutions are available, and obtaining advice early can help you avoid costly mistakes.
Call us today on 01273 777 333 to discuss your tax position, verify any proposed tax arrangement or explore a legitimate Time to Pay solution with HMRC.
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