How does HMRC debt collection work?

HMRC

Overview of HMRC’s Debt Collection ProcessHMRC debt collecting agencies work on behalf of The department of Debt Management and Banking at HMRC. You may have sent you a “last opportunity letter,” and if you ignored it, the next step might be a visit from a Field Force or Distraint Officer, or contact from a third-party debt collection agency hired by HMRC.

In general, you should anticipate that HMRC will follow your company through to its winding up once it reaches the stage of formal debt collection proceedings.

Unless they were unable to obtain payment over the phone or felt you were being uncooperative, an HMRC official is unlikely to show up at your place of business

If HMRC is pursuing you for unpaid debts, this is frequently a sign that your company may be insolvent. If you take the initiative at this point and get in touch with an insolvency practitioner, you’ll frequently get better results.

Please feel free to get in touch with us for a private, cost-free chat to discuss your alternatives.

Overview of HMRC’s Debt Collection Process

Typically, HMRC’s debt collection process uses a series of letters that get progressively more menacing will be sent before the decision is made to send out debt enforcement.

When a debtor simply cannot be traced, there is a chance that the debt will be transferred to another party or escalated, depending on the circumstances. Debt from PAYE and National Insurance are two instances when this is conceivable, though not always.

Overview of the Debt Collection Procedures at HMRC:

(1) Payment Reminders

The majority of the time, these take the form of letters or SMS text messages. Usually, the applicable tax department is the one pursuing the outstanding tax obligation; if it is not paid, it will be escalated to another department.

(2) Notice of Enforcement

At this point, what is known as a “Notice of Enforcement” may be issued in cases where debts are still due. These notifications, as their title makes apparent, announce HMRC’s impending intention to demand the recovery of their debts

(3) Enforcement Action (HMRC sends Bailiffs)

In this stage, formerly known as distraint, HMRC gives bailiffs instructions to inventory, seize, and then sell any assets necessary to pay debts in accordance with The Taking Control of Goods Regulations.

Read this article if you want to learn more about the legal authority bailiffs have to seize your property.

Third-party debt collection firms shouldn’t ever come to your house or place of business; they should only contact you via phone, SMS, or mail. In accordance with the “Taking Control of Things” legislation in England and Wales (or “Distraint” in Northern Ireland), only HMRC’s own enforcement team has the authority to actually seize goods.

(4) Further Escalation

When the proceeds of asset seizure are insufficient to pay off debts, HMRC will take further action.

The departments of HMRC responsible for debt management and banking (DMB) or late-stage debt resolution (HMRC LDR) will typically make an effort to collect the tax debt. At this point, communications typically include the threat of legal action against the corporation.

If the tax debts are significant and VAT, PAYE, or both are involved, other departments may become involved and the situation may significantly worsen. In addition to any other HMRC action, The Securities Team and/or The Fraud Investigation Service may become involved.

A Notice of Requirement (NOR) for a Security Bond and the inclusion of Joint and Several Liability for the director and or any other listed individual are possible outcomes of HMRC’s extra action, which typically involves PAYE and/or VAT. When PAYE debt is involved, a Personal Liability Notice may be used to hold the director personally accountable (PLN).

(5) Winding up Petition and Liquidation (HMRC Late State Debt Resolution)

The Enforcement and Insolvency Teams will become engaged if tax obligations are not settled through the escalation process.

The most serious tax division in the UK has its headquarters in Worthing. This department will demand immediate settlement of the tax obligation or, at the very least, a quick, comprehensive payment schedule. This department can begin the procedure to close your firm if this is not done promptly.

Transferring the tax debt to the HMRC Legal Department is the last step. The Winding up Petition will be filed by the HMRC Legal Department in order to compel the company to be liquidated.

Understanding HMRC debt collection

When it comes to recovering unpaid taxes, HMRC has a couple of tricks up their sleeve. If you find yourself owing money to the taxman, you might have a visit from one of their highly trained collection officers – known as a Field Force or Distraint Officer – who will try to collect the outstanding amount from you on the spot. Alternatively, HMRC has partnered with several third-party debt collection agencies and companies to help recover funds owed.

Interestingly, HMRC currently employs eight different debt collection firms for this purpose. These debt collectors will stop at nothing to seize any assets they can find on your company premises, which they will then sell to help pay off the debt. However, if you’re lucky enough to be visited by a Field Force or Distraint Officer, you may be able to make a payment towards your debt or set up a Time to Pay (TTP) arrangement for some extra breathing room. Either way, don’t expect HMRC to go easy on you if you’re behind on your taxes.

The debt collection agencies HMRC uses are as follows:

  • 1st Locate (trading as LCS) – 0113 228 4452
  • Advantis Credit Ltd – 01782 400400
  • Akinika Debt Recovery Ltd – 01772 557635
  • Bluestone Credit Management Ltd – 0114 242 6628
  • BPO Collection Ltd0141 375 0958
  • CCS Collect (also known as Commercial Collection Services Ltd) – 020 8665 4929
  • Moorcroft – 0330 123 9765
  • Oriel Collections Limited – 01242 508 639
  • Past Due Credit Solutions (PDCS) – 0141 447 0554

If you owe money to HMRC and they’ve brought in a debt recovery firm, things can get a little confusing. You might assume that you can pay off the debt directly to HMRC, but that’s not always the case. Instead, you’ll likely need to make payment to the debt collection agency handling your case. However, it’s important to double-check this information with HMRC before handing over any money.

If you’ve already been visited by a debt collection agency, you’ll need to speak with them directly to arrange payment or dispute the amount you owe. This can feel overwhelming, but it’s crucial to engage in open communication with the agency to ensure you’re on the same page. The sooner you tackle the issue, the sooner you can move on from the stress of unpaid taxes.

Remember, HMRC has a job to do, and they take tax debt recovery seriously. By taking proactive steps to address your debt, you can work towards a resolution that satisfies all parties involved.

Are there any Time Limits on HMRC’s Debt Collection Powers?

HMRC tax debts often have no temporal restrictions, and in very severe circumstances, the debt may even be passed down from generation to generation. The actual time constraints change depending on the circumstance. Business rates, for instance, have a 20-year collection period while income tax and VAT have no such limitations.

What Are Your Options if You’re Concerned about HMRC Debt Enforcement?

Debt collection is a sign that your company is seriously in trouble and that you need to get professional help right now.

You can learn more about the severity of your financial issues and the workable strategies to solve them from our team of qualified specialists in limited company debt. These can involve approaching your creditors with a Company Voluntary Arrangement, or structured repayment plan. Or you might need to negotiate with HMRC to buy yourself some time to pay.

Read more: Does HMRC Debt Affect Credit Rating

Conclusion

The work of HMRC in collecting debts is an important function that helps to ensure the proper functioning of the tax system and the fair distribution of financial burden among taxpayers. Through a combination of proactive measures, such as education and outreach, and reactive measures, such as enforcement and legal action, HMRC is able to effectively collect debts and maintain a high level of compliance among taxpayers.

It is important to note that HMRC also provides support and assistance to taxpayers who may be struggling to pay their debts, in order to ensure that they are able to meet their obligations in a fair and reasonable manner. Overall, the work of HMRC in debt collection is a critical aspect of the UK’s tax system and plays a vital role in ensuring the financial stability of the country.

To receive the support and guidance you require, please get in touch for a free consultation.

Insolvency & Restructuring Expert at Business Insolvency Helpline | + posts

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.