Keeping on top of VAT, PAYE and other tax liabilities
This is one of the key stresses for a business struggling with cash flow problems. Unfortunately, HMRC have unique debt collection powers that make it far more difficult to resist their demands. Unlike other creditors apart from landlords, HMRC are not required to obtain a court order of any kind before enforcing a tax debt.
Understanding your rights when faced with the onset of HMRC collection procedures is vital. Most importantly, it’s vital to recognise that if you have been served with an HMRC Notice of Enforcement and fail to comply, HMRC enforcement officers or bailiffs will be able to enter your property to recover unpaid debts.
What happens when an Enforcement Notice is served?
HMRC do not have to give warning of the first visit by one of its representatives. If there has been received correspondence from HMRC regarding an unpaid tax debt, a visit could be looming, but until an Enforcement Notice (Notice) is served there is no obligation to let any HMRC official into the business premises.
If an HMRC official delivers the Notice in person, they will probably want to discuss the debt and talk about the possibility of agreeing a repayment plan. They will also want to confirm the validity of the debt and should be able to take immediate payment from the business to settle the debt if that’s possible. The Notice will give the business just seven days to settle the amount claimed in full, so urgent action is essential.
When HMRC serve a Notice, it marks the end of the possibility of any negotiations regarding the amount owed. From this point on, the debt is due as claimed by HMRC and the only way to halt enforcement action is complying with the Notice or agreeing a repayment plan with HMRC.
This is subject only to the Notice being accurate. It is possible that administrative errors are sometimes made by HMRC when issuing Notices, or that businesses sometimes receive these notices by mistake, so it should be double checked to ensure:
- That all details are correct and that it has been sent to the correct business
- The debt mentioned is what has already been claimed by HMRC
Assuming the notice is correct, the business has a choice between paying the debt in full, or else negotiating some form of repayment plan which will do nothing to reduce the amount owed, but will give more time to pay.
Ignoring the Notice or taking too long to act is simply not an option. The inevitable outcome will be HMRC Enforcement Officers and eventually HMRC bailiffs knocking on the door and taking action that will threaten the survival of the business.
What happens if the debt isn’t paid within the 7 days?
Failing to pay the amount due or agree a repayment plan will result in HMRC Enforcement Officers or bailiffs arriving at the premises to recover goods to the value of the debt under a Controlled Goods Agreement.
What is the difference between Enforcement Officers and Bailiffs?
The distinction between HMRC Enforcement Officers and HMRC bailiffs can be unclear. Whilst an Enforcement Officer will be an HMRC employee, any bailiff taking action under the Notice will be from an independent of firm hired by HMRC to enforce payment of the debt.
There is a further distinction between a bailiff and a High Court Enforcement Officers (HCEO). An HCEO works according to a Writ of Control which only empowers them to recover debts of £5,000 or more, whereas a bailiff can collect debts below this amount.
What happens when an HMRC Enforcement Officer visits your premises?
If the premises are part or fully residential, their entry rights are limited to the normal routes, and the times at which they can gain entry may also be limited depending on the type of debt they are collecting and whether children are resident in the property.
During their first visit, they will discuss the debt in question and serve you with the Notice. The full amount must be paid within seven days of receipt of the Notice (excluding Sundays and Bank Holidays). As mentioned earlier, it may be possible to negotiate an instalment plan as an alternative to paying in full, in which case action to remove goods will cease as long as you keep up with the agreed payment schedule.
It is worth remembering that the Notice may not necessarily be delivered in person. HMRC may send it through the post or email – it may even be attached to the outside of the premises if no one was present when the officer arrived.
Non-payment results in a visit by HMRC bailiffs after seven days has passed, when they list the goods to be seized. This schedule forms part of a Controlled Goods Agreement, which you will be asked to sign. If you sign it, a further seven day period is offered, during which the debt can still be paid and the enforcement action stopped. Refusal to sign the agreement allows the Enforcement Officer or bailiff to arrange for the immediate seizure of goods.
Signing the Controlled Goods Agreement (the Agreement) also confirms an agreement to the goods listed in it being inspected or taken at any time. Goods included in the Agreement cannot be sold under any circumstances or moved without the consent of HMRC. Doing so is a criminal offence, which significantly worsens the overall situation. The Agreement confirms that the property stated is held under distraint by HMRC.
Enforcement Officers have authority to seize sufficient goods to cover not only the HMRC debt, but also the cost of enforcement. Goods which are seized are sold at public auction and consequently do not always achieve the value expected. This is why it may appear that Enforcement Officers are seizing an excessive value of assets from the business.
How we can help
We have extensive experience assisting business owners and directors, and we will always work with you to find the best solution for you and your business.
One of our Partners would be more than happy to have a non-obligatory confidential chat with you. We can be contacted at rescue@opusllp.com or call us on 0203 995 6380 and we will arrange for a call with one of our specialists.