What action can HMRC take against Outstanding Debts?

If you company has outstanding debts to HMRC in relation to pay as you go tax (PAYE) , National insurance contributions (NI), Corporation Tax (CT) and Value Added Tax (VAT), then here are a few tips to better understand their process for the collection of this debt.

1. A warning letter will be sent after you have missed the initial payment. This is normally a standard letter, but future correspondence will become increasingly threatening followed by a warning to issue legal proceedings.

In some cases, HMRC will consider a time to pay arrangement where they have seen the company’s payment history over the period of trading has been good and that the company is viable. Often, they transfer the case to a debt collection agency to recover the debt.

• If various warning letters have been received and the debt remains outstanding, then there will be a visit by an Enforcement Officer. The Enforcement officer has the power to negotiate a settlement with the company. This gives a further opportunity to the company Director to make settlement of the debt. Failing this an enforcement notice will be issued.

• The enforcement notice allows a period of seven days to negotiate a payment plan or repay the debt in full. If the debt is still not paid, then the enforcement agent is authorised to issue a Controlled Goods Agreement on the company’s assets. HMRC can recoup their debt through this process as opposed to issuing a Winding up Petition.

If they think that the company is likely to go into liquidation soon, then they are likely to recover more of the debt by seizing business assets before winding up occurs.

A Control Goods Agreement by HMRC also makes it more likely that the Company will be forced into Liquidation, as it will have lost its assets in the process.

• The enforcement officers often known as Field Agents, have the power to force entry into the company’s trading premises if there is no residential element.

• Bailiffs are different. They can often belong to an organisation employed by HMRC to deal with the collection of outstanding debts.

• The taking control of goods regulations gives HMRC officers the power to enter your trading address and list all the assets equivalent to the value of the outstanding debt.

• There will be a document called a Controlled Goods Agreement which the director will be asked to sign. The listed assets remain on site until they are sold. The director is not allowed to trade with these assets or sell them.

• If the debt is not paid within seven days of the agreement being signed then the assets will be sold at auction and the funds will be used to settle the amount outstanding. If insufficient funds are realised to pay the debt in full then HMRC will continue their action against the Company.

• The remainder of the balance will be pursued by HMRC by way of a Statutory Demand which is a formal payment request which can lead to a Winding up Petition being issued against the company.

1. This results in the company being placed into Compulsory Liquidation.

Next steps 

If you want to find out anything further about this topic then please feel free to call me on 0330 236 9930, 0330 236 9938 or 07961 116321. All conversations will be in strict confidence. You can also email me vee@navigatebr.com.

This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.