Understanding HMRC’s Process for Collecting Outstanding Debts
Since 2009, HMRC has been enlisting debt collection agencies to help it recover unpaid taxes. All third-party agencies are regulated by the Financial Conduct Authority[1]Trusted Source – FCA – Financial Conduct Authority and must follow HMRC processes and guidance at all times.
The agencies’ simple remit is to collect what is owed or refer the matter back to HMRC. They have the power to negotiate repayment plans, seize assets, or, in extreme cases, initiate court proceedings to recover the debts.
Key Takeaway: Most likely, a third-party agency will visit you rather than an HMRC Field Officer. It’s crucial to remain calm and professional during all interactions.
HMRC’s Debt Collection Process Explained
While HMRC is generally supportive of businesses in difficulty, it will consider debt collection (distraint[2]Trusted Source – GOV.UK – Enforcement action: distraint) when it feels its reminders and warning letters are being ignored or when it feels you’re not being honest with them.
Distraint is the legal process through which HMRC can seize and sell your company’s assets to recover the debt you owe.
Here are the typical steps in HMRC’s debt collection process:
1. Reminder Letters
HMRC first sends reminder letters, urging you to pay the outstanding amount. These letters detail the debt and emphasise the urgency of payment.
2. Final Notice
If you ignore the reminder letters, HMRC issues a ‘Final Notice,’ warning that more severe collection methods will follow if the debt remains unpaid.
3. Field Officer Visit
Should the Final Notice be disregarded, HMRC may send a Field Officer or an enforcement agent to your business premises. They will seek payment, discuss payment arrangements, or consider seizing assets if necessary.
4. Involvement of Debt Collection Agencies
In some cases, HMRC may pass the debt to an accredited third-party debt collection agency rather than sending their own officers. These agencies are authorised to act on HMRC’s behalf to recover the debt.
5. Distraint and Seizure of Assets
If you fail to pay or agree to a repayment plan, HMRC or the debt collection agency may take distraint action. This legal process allows them to seize assets from your business to cover the debt.
6. Court Proceedings
As a last resort, HMRC may initiate court proceedings to recover the debt. This could lead to further legal complications and additional costs for your business.
As of August 2024, HMRC uses the following FCA-regulated debt collection agencies to assist with unpaid taxes and other debts:
Agency Name
Trading As
Locate
LCS
Advantis Credit Ltd
–
Ardent Credit Services
Debt & Revenue Services (DRS)
Bluestone Consumer Finance Limited
Bluestone Credit Management
BPO Collections Ltd
–
CCS Collect
Commercial Collection Services Ltd
Moorcroft Debt Recovery Ltd
–
Pastdue Credit Solutions Limited
–
Important Note: Once your debt has been passed to a collection agency, HMRC advises that you pay the agency directly. Always verify the details with HMRC if there’s any dispute about the debt.
What Happens During an HMRC Debt Collector Visit?
When either a third-party debt collection agency or an HMRC Field Officer visits you:
Identity Confirmation: They will ask you to confirm your identity.
Discussion of Debt and Payment Options
Debt Discussion: The officer will discuss your debt and try to understand why it remains unpaid.
Payment Solutions: You may be offered the opportunity to pay your debt in full or to set up a Time to Pay (TTP) arrangement. TTP allows businesses to pay their debt in instalments over a set period, typically up to 12 months.
Consequences of Non-Payment
If you refuse to pay your debt or set up a TTP arrangement, the debt collector may take further action:
Seizing Assets: The collector may seize your business assets, such as vehicles or equipment.
Wage or Benefit Deductions: They might deduct payments directly from your wages or benefits.
Court Action: If necessary, they may take you to court, leading to additional legal and financial complications.
Reminder: These agencies are required to treat you fairly. If you feel mistreated, you have the right to file a complaint with the agency or HMRC.
Concerned about HMRC Debt Collectors?
Dealing with HMRC debt collectors can be stressful, especially if you’re facing threats of enforcement action. It’s crucial not to ignore these issues, as doing so can lead to serious consequences like asset seizures or court action.
Take Immediate Action: If you’ve received a threat, seek professional advice right away. At Company Debt, we can help you understand your options, whether it’s negotiating a Time to Pay (TTP) arrangement or exploring other solutions like a Company Voluntary Arrangement (CVA).
Engage with HMRC or the Debt Collection Agency: Open communication is key to resolving the situation. Demonstrating your willingness to pay can lead to more manageable repayment terms and potentially avoid more severe enforcement actions.
We understand how overwhelming this process can be, but you don’t have to face it alone. Call us on 0800 074 6757 or use the live chat in the lower right-hand corner to get expert advice and support. We’re here to help you navigate the complexities of HMRC debt collection and protect your business.
FAQs on HMRC Debt Collection
What are my rights when dealing with HMRC debt collectors?
When interacting with HMRC debt collectors, you have the right to fair treatment, clear communication about your debt, and reasonable time to arrange payment. Debt collectors are regulated by the Financial Conduct Authority (FCA) and must adhere to professional standards.
Can HMRC debt collectors take immediate action to seize assets?
No, HMRC debt collectors cannot immediately seize assets without providing notice. Initially, they will attempt to understand your situation and offer options such as full payment or a Time to Pay arrangement. Asset seizure is a last resort and usually follows failure to agree on a repayment plan.
What should I do if I disagree with the debt amount claimed by HMRC or its collectors?
If you disagree with the debt amount, contact HMRC directly to clarify and rectify any discrepancies. It’s crucial to keep records of all communications and payments as evidence.
How can I prepare for a visit from an HMRC debt collector?
Prepare by gathering all relevant financial documents and understanding the details of your debt. Be ready to discuss your financial situation openly and explore repayment options. Demonstrating a cooperative attitude can help in negotiating more favourable terms.
References
The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.
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