HMRC debt and enforcement

HMRC is ramping up action against tax defaulters while the end of the winding up ban at the end of September will be a shock for some businesses protected by pandemic measures.
As lockdown measures have relaxed, HMRC has restarted debt collection activities with taxpayers. It will initially focus on activities relating to collecting debts from people who are least affected by Covid-19, those who are most able to pay their tax debts, taxpayers who have not responded to any correspondence or have not contacted HMRC to manage their account and arrears.
According to the London Gazette, there has been a negligible number of winding-up petitions lodged by HMRC this year, going back to March 2020. Therefore, it seems likely that once HMRC is free to start issuing winding-up petitions again, the numbers could rise sharply. HMRC is likely to be under some pressure to collect revenue for what is a much-depleted Exchequer. However, in light of the pandemic, enforcement of debt remains a political decision and could lead to further forbearance in certain instances.
HMRC has stated that the overdue debt balance was impacted by the start of the Covid-19 lockdown and caused additional overdue debt of an estimated £2.5bn (which is included in the £19.0m overdue debt pile). HMRC fully expects there to be further substantial increases in the debt balance from 2020 to 2021 due to the ongoing economic impact of the pandemic.
Therefore, HMRC will be under pressure to ensure these debts are collected and the time-to-pay (TTP) scheme will play a key part in this. HMRC’s role as a preferential creditor in insolvency proceedings will also increase pressure for it to engage with businesses in a proactive manner.
A total of approximately 27% of businesses that benefited from the Chancellor’s VAT deferral between March and June 2020 have failed to contact HMRC to pay the money they owe, even though the deadline to repay it or arrange a repayment plan expired on 30 June  2021. Approximately £2.7bn remains outstanding which will be subject to enforcement action from September 2021.

In addition to the deferred VAT, which remains outstanding, it is likely many businesses have failed to pay the associated PAYE and National Insurance contribution (NIC) on the Coronavirus Job Retention Scheme (CJRS) claims of furloughed employees (the CJRS grant paid businesses the gross employee cost which includes the PAYE and NIC).



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