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HMRC Debt Collection & Management: An Expert Guide

August 21, 2023 Hasib Howlader HMRC Debt Collection & Management: An Expert Guide

In this guide we explore HMRC debt management and collection, including the options if your business is struggling to make a repayment.

If that’s the case, your company isn’t alone. The National Audit Office reports the total tax debt reached £42bn in September 2021, up from £16bn in January 2020 before COVID-19.

While the pandemic has now subsided, many businesses continue to struggle with debt. The government offered a bounce back loan during COVID-19, but several years later, lots of companies are struggling to repay it.

There are many different factors that can cause debt, but regardless of the reasons, there are also plenty of steps you can take to improve the situation. Before considering the different HMRC debt management options, let’s first look at how debt collection works. 

How HMRC collects debt

Once a tax payment is overdue, you should receive a reminder letter from HMRC. If no remedial action is taken, a final opportunity or notice of enforcement letter will follow.

If the debt remains unresolved, there will be an in-person visit from an HMRC debt collector or authorised third-party agency. 

If the latter, contact HMRC to check that the agency is acting on the government’s behalf for your case - according to the government there are currently eight authorised agencies.

The collector will seek the debt repayment via company funds, and if that’s not possible, they may seize assets.

Other enforcement action HMRC may take includes issuing a winding up petition, which could lead to a compulsory liquidation.

A statute barred status is not applicable to tax collection - HMRC has the power to pursue debts indefinitely.

The phone number for an authorised tax agent to discuss a client’s debts is 0300 200 3887 - this is the Agent Dedicated Line.

HMRC debt management

If HMRC is looking to collect a debt amount that your business will struggle to repay, seek expert help from a Chartered Insolvency Practitioner as soon as possible.

Depending on your situation, there are some different options that can grant extra time to pay the debt, or otherwise limit the fallout.

These include:

  • Time to Pay (TTP) arrangements: A debt collector may present this as an option at the time of an in-person visit. Alternatively, you can apply for this separately or via an insolvency practitioner. TTP arrangements, beginning in 2008, grant a 6-12 month term for paying a tax debt in instalments - if granted.  
  • Company administration: Another way of getting some extra time to assess options is by appointing company administrators. They review the business’ position and see if there is sufficient support to continue the business. Administrators may recommend one of the following options:
  • Company Voluntary Arrangement (CVA): During a CVA, a formal repayment plan is put in place while the business continues to trade. Once agreed, this eases the pressure from HMRC and can help the business avoid liquidation. Note though that Companies House and the business’ credit file will include a record of the CVA.
  • Creditors’ Voluntary Liquidation (CVL): This is a structured arrangement for when HMRC debt management is no longer an option, because the repayments required are too high. Shareholders vote to approve the CVL process. After that, the business ceases trading and sells off its assets.

A members’ voluntary liquidation (MVL) is not an option for HMRC debt management as this is only for solvent companies that are planning to cease operations.

A business could oppose a winding up petition if its directors are certain they have a strong case - legal advice should be sought first in this scenario.

Failing to take any action at all in terms of HMRC debt management could result in a compulsory liquidation.

Summary: HMRC debt management and collection

If your company owes money to HMRC, you should receive a reminder letter followed by a final warning if you take no action.

After this, a debt collector will aim to recoup the money - this could include seizing company assets.

A simple option to help manage the debt includes applying for a TTP arrangement. But for bigger debts, the business may require a CVL or CVA.

So, what’s the difference between a CVL and CVA? While they have some similarities, the latter is much more likely to allow a business to continue trading.

If you have concerns about a tax debt owed to HMRC, seek support from an experienced Insolvency Practitioner without delay.

We are ICAEW-licensed insolvency practitioners - please get in touch with us for any queries about HMRC debt management or collection.

ACCAThe Association of International AccountantsICAEW Authorised Training EmployerICAEW Licensed Insolvency Practitioners (UK)Insolvency Practitioners AssociationR3

Hudson Weir are an established firm of Insolvency Practitioners who specialise in business recovery and corporate financial solutions.

Hudson Weir provides industry leading, nationwide services for its clients with the intention of easing financial pressures and providing recovery strategies for struggling businesses.

Hudson Weir Ltd (Company number 09477593) is a company registered in England and Wales.

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