While HMRC primarily handles matters internally, there are instances in which third-party debt collectors may enter the equation.

This article aims to provide a comprehensive overview of the circumstances under which HMRC employs external debt collection agencies. We will delve into the regulatory framework governing this practice, the criteria HMRC uses to resort to this option, and your rights and responsibilities as a business owner.

hmrc

Dealing with HMRC Debt Collection Agencies

Since 2009, HMRC has been enlisting a rota of debt collection agencies to help it recover unpaid taxes. While the practice has been somewhat controversial, there’s no sign that this will cease in the near future.

All third-party agencies authorised are regulated by the Financial Conduct Authority and must follow HMRC processes and guidance at all times.

In particular, they are forbidden from visiting you at your home or place of work.

The agencies have the simple remit of collecting what is owed or referring the matter back to HMRC.

Keeping a calm and professional demeanour is key during all interactions. These agencies are regulated, ensuring they follow strict guidelines, so it’s important to remember you’re entitled to fair treatment and reasonable time to resolve your debts.

Make sure to familiarise yourself with your rights to ensure you’re treated justly throughout the process. If anything feels off, you have the ability to voice your concerns directly to HMRC.

Will HMRC Use Debt Collectors to Recover Debts?

Yes, HMRC does use third-party debt collectors in certain cases. This generally occurs when internal attempts to recover owed taxes have been unsuccessful.

HMRC’s primary method of debt recovery is through its own internal processes. These include sending reminders, setting up payment plans, and conducting investigations. However, when these steps fail to secure payment, HMRC may decide to engage a debt collection agency to act on its behalf.

It’s important for business owners to be aware of this possibility, as it adds an additional layer to the debt recovery process. These third-party agencies operate under strict guidelines set by HMRC, and they are authorised to collect various types of debts, including Income Tax, Corporation Tax, and VAT.

Understanding that HMRC can and does use external agencies for debt collection enables you to be better prepared in case your business finds itself in such a situation.

Which Debt Collection Agencies do HMRC Use?

HMRC use the following debt collection agencies:

  • 1st Locate (trading as LCS)
  • Advantis Credit Ltd
  • Akinika Debt Recovery Ltd
  • Apex Credit Management Ltd
  • Bluestone Credit Management Ltd
  • CCS Collect (also known as Commercial Collection Services Ltd)
  • Drydensfairfax Solicitors
  • Fidélité Credit Management
  • Fredrickson International Ltd
  • Moorcroft
  • Past Due Credit Solutions (PDCS)
  • Rossendales Ltd
  • Walker Love

Once the debt has been passed to a collection agency, HMRC advises that you should pay the agency directly rather than them. You should check the details provided by the debt collection agency, such as the amount owed and contact HMRC if there is any dispute about these.

If you can show that the company cannot afford to pay the outstanding debt, the collection agencies may accept a plan to make payments via instalments, but they can be very aggressive, and it may be that you want help discussing this with them.

What Happens During an HMRC Debt Collector Visit?

If you have a debt to HMRC and have not paid it, they may send a debt collector to visit you at your home or business address. This is a last resort, and HMRC will only do this if they have tried to contact you in other ways and you have not responded.

When an HMRC debt collector visits you, they will:

  • Show you their HMRC identification card, which will have their name, photograph and HMRC serial number on it.
  • Ask you to confirm your identity.
  • Discuss your debt with you and try to understand why you have not paid it.
  • Offer you the opportunity to pay your debt in full or to set up a Time to Pay (TTP) arrangement.

If you are unable to pay your debt in full, a TTP arrangement will allow you to repay it in monthly instalments over a period of time, typically 12 months. HMRC will consider your financial circumstances when setting up a TTP arrangement.

If you refuse to pay your debt or to set up a TTP arrangement, the debt collector may take further action, such as:

  • Seizing your assets, such as your car or home.
  • Making a deduction from your wages or benefits.
  • Taking you to court.

HMRC debt collectors have a lot of power, but they are also trained to be reasonable and understanding. If you are struggling to pay your debt, it is important to be honest with them and to work with them to find a solution.

What to do if you are threatened with HMRC debt enforcement action

If you’re threatened with HMRC debt enforcement action, acting quickly is essential to avoid further complications. Here are the steps you can follow:

  • Contact HMRC right away: Discuss your situation with them. They might pause the enforcement action while you sort things out.
  • Be honest about your financial circumstances: This transparency will assist HMRC in directing you toward an appropriate solution.
  • Inquire about a Time to Pay (TTP) arrangement: This allows you to break down the debt into monthly instalments, usually over a span of 12 months.
  • If you can’t pay anything right now: Ask HMRC if they can temporarily hold off on your debt until your financial situation improves.

Overview of HMRC’s Debt Collection Process

Notices of debt are usually triggered via HMRC’s powerful computer system. From here, a succession of increasingly threatening letters will be sent, leading up to the decision to send out debt enforcement.

In some situations, debtors simply cannot be located, in which case (depending on the circumstances) there is the possibility of debt being transferred and or escalated to other parties. Two examples where this is possible are PAYE and National Insurance debt, though not in all cases.

Briefly, this is the HMRC debt collection process:

(1) Payment Reminders

These are usually in the form of letters or SMS text messages. Usually, it will be the relevant tax department chasing the tax debt outstanding, and if it remains unpaid will be escalated to another department.

(2) Notice of Enforcement

Where debts are still unpaid, what is called a ‘Notice of Enforcement’ may follow at this stage. As its title makes clear, these notices announce HMRC’s imminent intent to enforce recovery of their debts.

(3) Enforcement Action (HMRC sends Bailiffs)

Formerly known as distraint, this stage means that HMRC instruct bailiffs to inventory, seize and then sell whatever assets it requires to settle the debts under the under The Taking Control of Goods Regulations. [1]Trusted Source – Legislation – The Taking Control of Goods Regulations 2013

If you need to know more about what right bailiffs have to seize your assets, read our article here.

Third-party debt collection agencies should never visit you at your home or workplace but instead use phone, SMS or letter. Only HMRC’s own enforcement team has the power to actually seize goods under ‘Taking Control of Goods’ regulations in England and Wales (or ‘Distraint’ in Northern Ireland)

(4) Further Escalation

Where the seizure of assets does not yield enough to satisfy debts, HMRC will escalate the matter.

Typically HMRC’s Debt Management and Banking (DMB) or HMRC Late Stage Debt Resolution departments will attempt to recover the tax debt. At this stage, the threat of legal action against the company will usually be added to communications.

If the tax debts are substantial and VAT and or PAYE is involved, other departments may get involved and escalate the matter considerably. The Securities Team and or The Fraud Investigation Service can get involved in addition to any other HMRC action.

HMRC’s additional action usually involves PAYE and/or VAT and can lead to a Notice of Requirement (NOR) for a Security Bond and add Joint and Several Liability for the director and/or any other named individual. Where PAYE debt is involved, it can lead to the director being made personally liable using a Personal Liability Notice (PLN).

(5) Winding up Petition and Liquidation (HMRC Late State Debt Resolution)

If tax debts remain unpaid, the escalation process will lead to the Enforcement and Insolvency Teams getting involved.

This department is based in Worthing and is the most serious tax department in the UK. This department will want the tax debt paid immediately or at the least a very short, detailed and realistic payment plan. If this is not forthcoming, this department can start the process to close your company.

The final stage is for the tax debt to be transferred to the HMRC Legal Department. The HMRC Legal Department will issue a Winding up Petition to compulsory liquidate the company.

Are there any Time Limits on HMRC’s Debt Collection Powers?

Generally, there are no time constraints on HMRC tax debts, and the debt can even be transferred from generation to generation in some extreme cases. The practical time limits vary from situation to situation. Business Rates, for example, can be collected for up to 20 years, whereas income tax and VAT have no time constraints.

Expert Advice

If your business is facing the prospect of debt recovery actions from HMRC, it is crucial to consult an insolvency expert to guide you through this complex process. As specialists in this field, we can provide tailored advice to help you navigate the regulatory intricacies and mitigate potential financial risks.

We know that the process can be stressful and are always happy to help. Call us on 0800 074 6757 or use the live chat in the lower right-hand corner.

References

The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.

You can learn more about our standards for producing accurate, unbiased content in our editorial policy here.

  1. Trusted Source – Legislation – The Taking Control of Goods Regulations 2013