For the first time in three years, HMRC have updated their rules of engagement on how they will deal with businesses and directors with tax debts and arrears. 

You can read the whole thing here but as there are several changes and important points that are worth dwelling on, this guide will highlight the most important and pertinent points. 

HMRC states that they will always make contact with the business or individual before any action is taken to try and agree a way forward. 

This includes considering a Time to Pay arrangement if applicable; using any overpaid tax that would normally be repaid to clear any outstanding tax debts or potentially adjusting their tax code in order to collect any outstanding tax debts, if their income is received through PAYE. 

The exceptions to the above are if HMRC suspects fraud or other criminal activity.

HMRC approved debt collection agencies (DCAs)

There are eight officially approved debt collection agencies that HMRC will use that are all regulated by the Financial Conduct Authority (FCA). 

They are:-

  • 1st Locate – trading as LCS
  • Advantis Credit Ltd
  • Ardent Credit Services – trading as Debt & Revenue Services (DRS)
  • Bluestone Consumer Finance Limited – trading as Bluestone Credit Management
  • BPO Collections Ltd
  • CCS Collect – also known as Commercial Collection Services Ltd
  • Moorcroft Debt Recovery Ltd
  • Pastdue Credit Solutions Limited

They will only contact businesses by letter, phone or SMS text message. They will not visit at home or place of business at this stage.

If contact is made by phone then there will be some security questions asked to ensure the confidentiality of your tax affairs. 

Tax debt enforcement powers – what they are and how they will be deployed

The three catalysts for using debt enforcement powers are if they are unable to contact the named contact; if the contact refuses to pay what they legally owe or if their debt is returned to HMRC from a debt collection agency. 

The options available include:

  • Taking possessions to cover the debt using “taking control of goods regulations” in England and Wales; “distraint” in Northern Ireland and using a summary warrant in Scotland. There are specific guidelines issued on how bailiffs will act and what goods may or may not be taken although various fees will apply in all cases depending on the jurisdiction.
  •  Recovering debt directly from a bank account if the debt is £1,000 or more and there are enough funds in the account to cover both the debt and reasonable living costs. 
  • Recovering the debt through your tax code – tax codes can be adjusted in the current tax year to recover equal monthly amounts with up to 50% of a gross income eligible under this process
  • Recover through county court proceedings, property and pensions
  • Insolvency – can include compulsory liquidation but Company Voluntary Arrangements (CVA) might also be considered

If you are having difficulty meeting your HMRC tax obligations whether it be paying Corporation Tax, PAYE, National Insurance Contributions or VAT or are already in arrears the best thing you can do is get some professional, impartial advice. 

Once you have a free chat with one of our advisors and they get a better understanding of your situation and circumstances they’ll be able to let you know what options you have to avoid unpleasant but legal calls from HMRC or their representatives.