New research reveals that HMRC has doubled down on its ‘aggressive’ debt collection policy over the last 12 months.
The Independent reports that the tax authority seized assets from 2,833 businesses that couldn’t pay their tax bill on time last year, which is up 45 per cent from 2016/17.
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HMRC can do this under its powers of distraint, which lets it seize assets and sell them at fire-sale prices.
What is an HMRC notice of distraint?
Distraint notices have become increasingly common over the last few years. They give HMRC the power to take control of goods and assets without going to court.
They also charge fees – the fee for issuing a notice of enforcement is £75, while the fee for selling goods at auction is £110 plus 7.5 per cent of the proportion of the main debt over £1,500.
If you owe HMRC money, an officer visits you and asks you to pay. If you don’t pay, the officer makes a list of your possessions, which they can then sell to recoup the debt.
HMRC can seize items such as IT equipment, machinery, vehicles, and stock. Assets like these tend to be fundamental to a business’s operation, so there’s a good chance it’ll be forced to stop trading.
An uncertain time for businesses
Funding Options commissioned the research. They say that increasing pressure on businesses who can’t pay their tax bill comes at a time when firms already face an uncertain future, with Brexit details still to be confirmed and interest rates rising.
The Independent reports that experts have criticised HMRC’s approach, as they often sell assets at public auction for fire-sale prices. This means they aren’t always able to recoup the debt anyway.
Last year HMRC raised £69.7 million by selling off business assets, up from £41.6 million the previous year.
Are there other options open to HMRC?
The chief executive of Funding Options, Conrad Ford, says: “There are often genuine reasons why these firms aren’t able to pay their tax bills on time, such as cash flow issues stemming from late payments from clients.”
He wants to see HMRC taking a more lenient approach, giving businesses room to breathe. He suggests HMRC could explore more generous ‘time to pay’, which is where it evaluates a business’s options for spreading payments over a period of time.
HMRC currently says that if they don’t think a business can get its payments on track with more time, they won’t make an arrangement and will instead expect them to pay their tax bill straight away.
What do you think of this HMRC policy? Let us know in the comments below.