How does HMRC debt collection work?

Dealing with HMRC debt collection agencies

If your company is grappling with HMRC arrears, such as unpaid VAT, corporation tax, and/or PAYE, you may be facing increasing pressure to settle the outstanding amounts. HMRC typically initiates the collection process by sending reminder letters, urging prompt repayment. In the absence of payment, your company might receive a ‘final opportunity letter,’ and HMRC may escalate the matter with a visit from a debt collector.

HMRC is persistent in recovering money owed by companies and utilises substantial resources for this purpose. As a large organisation, they may employ debt collection agencies or dispatch their own officers to recover outstanding amounts from businesses that have become overdue or fallen into arrears. 

Understanding HMRC debt collection

HMRC employs two main routes for debt collection. In some cases, you may face a visit from a Field Force or Distraint Officer, who is a trained collection officer directly employed by HMRC. Alternatively, HMRC engages several third-party debt collection agencies and companies to conduct tax debt recovery on their behalf.

According to Gov.uk, HMRC currently collaborates with 8 different debt collection firms to recover unpaid taxes. The objective of HMRC debt collectors is to seize assets from the company premises, which will then be sold to generate funds for repaying the debt. However, during a visit from a Field Force or Distraint Officer, you can also make a payment towards the debt or alternatively set up a Time to Pay (TTP) arrangement if you need additional time to settle the money owed.

Once HMRC has assigned a debt recovery firm to pursue the debt, it is common for payments to be made to the HMRC debt collection agency rather than directly to HMRC. However, it is crucial to confirm this by directly contacting HMRC before making any payments.

If you have already been visited by an HMRC debt collection agency and you want to make a payment or dispute the amount owed, you will need to reach out to the specific debt collection agency that is handling the case. Engaging in direct communication with the agency is essential in such situations.

Concerned about HMRC debt collectors?

HMRC typically makes several attempts to recover debts, employing methods such as calls and letters to notify that tax payments are overdue. Receiving a letter threatening action from an HMRC enforcement officer often follows a prolonged period during which a company has failed to meet tax liabilities, despite prior collection efforts by HMRC. Even though this situation arises from a series of collection attempts, the experience of receiving a visit from a debt collection officer can still be distressing.

If you face the threat of a visit from an HMRC debt collection agency or a field force officer, taking prompt action to address the situation is crucial. Ignoring the issue will not make it disappear; in fact, it may exacerbate the problems. Seeking expert company debt advice from a licensed insolvency practitioner can help you understand your options and formulate a plan for the future.

At Vanguard Insolvency, we assist company directors dealing with financial distress, which often includes tax debts owed to HMRC for unpaid VAT, PAYE, or corporation tax. Directors may unintentionally prioritise payments to trade creditors over tax obligations, leading to challenges when attempting to settle HMRC debts later. Seeking professional advice is essential to navigate through such financial difficulties. 

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

When faced with the threat of HMRC company debt collectors, seeking prompt professional advice is the best course of action. There are various options available, even if you currently lack the funds to settle the entire balance owed.

At Vanguard Insolvency, our team of business rescue and recovery experts can assist you in crafting a compelling proposal to HMRC, requesting additional time to settle the money owed through a Time to Pay (TTP) Arrangement. We can engage with HMRC on your behalf, leveraging our extensive experience to present your case optimally and enhance the likelihood of establishing a viable payment plan. 

Alternatively, if your debts to HMRC are part of a larger financial challenge, we can explore the option of a Company Voluntary Arrangement (CVA). This formal process enables you to negotiate with all creditors, including HMRC, to lower monthly repayments to a more manageable and sustainable amount.

Read More:

• Notice of Enforcement
• What are Employer Financed Retirement Benefits Schemes (EFRBS)
• What does HMRC Secondary Preferential Status mean for creditors
• What happens when HMRC want to visit my business
• What is a HMRC field force officer and what are their rights

How Vanguard Insolvency can help

If you are grappling with HMRC tax or PAYE arrears, we extend a free initial consultation to all company directors, shareholders, and sole traders. Whether you’re in the early stage of receiving an overdue tax letter from HMRC or facing the more critical scenario of enforcement officers knocking on your door, we can offer expert independent advice. 

Contact us today for immediate assistance and advice, or to schedule a no-obligation consultation with a licensed insolvency practitioner.