corporate recovery 21
How to deal with an increasingly
aggressive HMRC
Many businesses may have noticed recently that HMRC has become increasingly aggressive in how it collects overdue taxes. Perhaps this comes as no surprise given the position of UK plc, but it is interesting to look at HMRC‘s changing stance, the strategies it employs and how best to deal with it, writes Peter Hughes-Holland, southern restructuring partner, RSM Tenon
The issue of a winding- up petition can put a business in a very difficult position before it even reaches the court hearing stage
Quite how HMRC will enforce the use of the RTI system is another matter. One of the more novel approaches is the naming and shaming of serial tax defaulters on HMRC‘s website
a result of this relatively cheap method of debt collection.
Finally, the deferred tax scheme operated by HMRC known as the Time to Pay scheme, seems to be used less these days. Although these schemes are still being granted, anecdotal evidence points to the fact that it is a lot more difficult to enter into one of these plans. If a business does manage to obtain a deferral from HMRC, or has a historic agreement in place, then it is expected that the agreement will be adhered to, as well as current taxes being paid on time. If this is not the case, then HMRC is unlikely to offer any second chances and will take collection action.
It is also worth mentioning some of the more recent innovations that HMRC is now implementing, Real Time Information (RTI) being one of the most significant changes to our taxation collection process in some time.
It remains to be seen as to what impact this will actually have, but once the system starts operating correctly, it should in theory allow HMRC to commence the collection process sooner and not allow taxes to increase to an unmanageable level, as it will have greater visibility. Quite how HMRC will enforce the use of the RTI system is another matter. One of the more novel approaches is the naming and shaming of serial tax defaulters on HMRC‘s website. While it is difficult to assess the impact of this upon tax collection, it certainly shows that HMRC is looking at more innovative and cost-effective methods of collection.
So now we know how HMRC is going about collections, it is useful to understand the best way to deal with them if businesses are unable to pay the full amount due. Communication is absolutely key when dealing with HMRC; regular contact should be maintained in order to keep HMRC informed and prevent matters being escalated.
One of the most popular methods of collection utilised by HMRC where there are arrears, is the use of a winding-up petition to collect outstanding tax. If ignored this could result in a company being placed into liquidation, or in the case of an individual, bankruptcy. The issue of a winding-up petition can put a business in a very difficult position before it even reaches the court hearing stage. If advertised, the bank will in all likelihood freeze the company‘s bank account, making it virtually impossible for trade to continue. Published figures show the number of winding-up petitions issued by HMRC has risen from 3,367 in 2010/11 to 5,302 in 2011/12, an increase of 57%.
Another tool in HMRC‘s armoury is the use of distraint over a business‘ assets. Along with landlords, HMRC is the only creditor that can adopt this practice, which enables the Crown to seize the assets of a business in lieu of the owed debt. Naturally if a business loses control of its assets, then in most cases it will not be able to trade on.
Again, published figures show the number of distraint notices issued by HMRC have risen from 5,520 in 2010/11 to 10,577 in 2011/12. This is quite a significant increase, which is most probably as
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – JULY/AUGUST 2013
www.businessmag.co.uk
It is also vital that tax returns continue to be filed by the business in order to ensure that HMRC is dealing with accurate information and not relying on estimate figures, which always tend to be higher than actuals. Finally and perhaps most importantly, it is important to take early advice and involve a professional, such as an insolvency practitioner who is used to dealing with HMRC in these type of situations, in order to retain as much control as possible, so that a favourable outcome can be achieved.
Details:
Peter Hughes-Holland 07860-322515
peter.hughesholland@
rsmtenon.com
RSM Tenon offices:
Southampton – 023-8064-6464 Basingstoke – 01256-312312 Reading – 0118-9530350 Marlow – 01628-478100
www.rsmtenon.com
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