Discover the process HMRC uses to collect outstanding debts, including the steps they take and the potential consequences for your business.

HMRC’s Debt Collection Process Explained

While HMRC is generally supportive of businesses in difficulty, it will consider debt collection (distraint[1]Trusted Source – GOV.UK – Enforcement action: distraint) when it feels its reminders and warning letters are being ignored or when it feels your company is not being honest with them.

If a company fails to respond to their communications or make satisfactory arrangements to settle arrears, HMRC will issue a ‘Final Notice’ letter, making it clear that it will soon pursue more aggressive collection methods[2]Trusted Source – GOV.UK – What will happen if you do not pay your tax bill.

If this is ignored, they will send either one of their own bailiffs – known as enforcement agents – or enlist the services of an accredited third-party debt collection agency.

We’ll cover the stages of HMRC’s debt collection process, the enforcement powers available to them, and the implications for your business.

How Does HMRC Debt Collection Work?

How Does HMRC Debt Collection Work?

Since 2009, HMRC has been enlisting a rota of debt collection agencies to help it recover unpaid taxes. All third-party agencies authorised are regulated by the 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.

In most cases, it’s likely to be a third-party agency visiting you rather than an HMRC Field Officer themselves.

In either scenario, 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.

Which Debt Collection Agencies do HMRC Use?

HMRC use the following debt collection agencies:

  • 1st Locate (trading as LCS)
  • Advantis Credit Ltd
  • Ardent Credit Services (trading as DRS — Debt & Revenue Services)
  • Bluestone Consumer Finance Limited (trading as Bluestone Credit Management)
  • BPO Collections Ltd
  • CCS Collect (also known as Commercial Collection Services Ltd)
  • Moorcroft Debt Recovery Ltd
  • Pastdue Credit Solutions Limited

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?

When either an accredited third-party debt collection agency appointed by HMRC, or an HMRC field officer visits you, they will:

  • Show you their identification card, which will have their name, photograph and HMRC serial number on it if they’re an official employee[3]Trusted Source – GOV.UK – Confirm the identity of someone representing HMRC.
  • 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.

A TTP arrangement allows businesses to pay their debt in instalments over a time period, typically up to 12 months, depending on the amount owed and the business’s current financial situation.

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.

Concerned about HMRC Debt Collectors?

If your business is facing the prospect of debt recovery actions from HMRC, it is crucial to consult an insolvency expert such as ourselves 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.

FAQs on HMRC Debt Collection

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.

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.

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.

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.

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

  1. Trusted Source – GOV.UK – Enforcement action: distraint
  2. Trusted Source – GOV.UK – What will happen if you do not pay your tax bill
  3. Trusted Source – GOV.UK – Confirm the identity of someone representing HMRC