The gloves are off: HMRC is gearing up to resume collection of tax arrears

On 30 June 2021, HMRC published a policy paper announcing that it was resuming its pro-active approach to debt collection and when necessary will use enforcement to deal with those that ignore them.

The paper specifically refers to HMRC’s intention to resume use of their enforcement powers from 30 September 2021,

They are contacting all customers with tax arrears with a view to reaching agreement over payment before the need to use enforcement powers.

They will reserve their options for which method to use for collection but these are likely to be influenced by their previous experience of dealing with each company and the level of cooperation.

Their options for recovery are:

· Agree terms for payment;

· Consider a short-term deferral;

· Agree a Time to Pay Arrangement such as monthly payments over 6, 12 or 24 months;

· Discuss prospects for raising finance to make payments;

·  Discuss other forms of support such as government-backed loans and loan repayment holidays to accelerate payments;

· Visit companies who ignore them or who refuse to pay their taxes;

· To use their enforcement powers including the right to seize goods and assets, issue summary warrants and issue winding-up petitions; although they can only do these after 30 September.

Other factors are:

· While their language refers to HMRC being supportive, such as HMRC's debt management teams and under the Debt Respite Scheme, essentially the level of support is covered by the deferred payment measures above;

· Not mentioned in the policy paper but another sanction they have been using for the last few years is their right to demand security deposits in respect of VAT and PAYE. While the demand letters look innocuous, failure to respond within 28 days is a criminal offence;

· HMRC are also likely to discuss furlough claims as they are on the hunt for companies that have made illegal claims.

While HMRC have undertaken to use their enforcement powers "fairly and carefully", don’t be fooled, they plan to collect tax arrears. The government needs the money.

The key messages are:

1.   Communicate with HMRC;

2.   Prioritise current and ongoing PAYE and VAT obligations as there is no latitude for future arrears;

3.   Only agree terms for paying arrears that can be afforded as there is no latitude for further delays.

The HMRC Policy Paper and a free Guide to dealing with HMRC can be read here 

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