Concerned about HMRC enforcement officers?
This article will explore how they work in England and Wales and under what circumstances they’re sent. HMRC uses different enforcement procedures in Scotland and Northern Ireland.
If you have received a tax bill from HMRC that you are simply unable to pay, it’s essential you contact HMRC immediately to try and reach some sort of payment arrangement.
Do so successfully and you can nip this problem in the bud. If you are refused a ‘Time to Pay’ arrangement and your bill remains unpaid, HMRC will start proceedings to recover the money. Ultimately, that enforcement action could end in the closure of your business.
The first action HMRC is likely to take is to charge interest on any bill you do not pay, and to add late payment penalties where they apply. Late payment penalties can apply to VAT and PAYE, among other taxes. Corporation tax paid late attracts interest only, with no late payment penalty. If you still cannot pay the debt you owe and HMRC is unwilling to agree to a payment plan, you could receive a notice of enforcement and come face to face with HMRC enforcement officers. This stage is separate from the private debt collection agencies that HMRC uses, which only write, text or phone. See HMRC debt collection agencies.
I’ve Received an HMRC Notice of Enforcement
If you have received a notice of enforcement from HMRC, it is essential you understand your rights. Once the notice has been served, it is still possible to make a Time to Pay arrangement with HMRC. This will allow you to pay a lump sum and then repay the remaining balance over a longer period, usually up to about 12 months, and longer only in exceptional cases.
If you do not pay the debt in full or reach a repayment agreement with HMRC within the period in the notice of enforcement (at least 14 clear days), the next stage in HMRC’s recovery action can begin. That is for HMRC enforcement officers or enforcement agents to arrive at your door. For that reason, a notice of enforcement is not something you should ignore.
What Happens when HMRC Enforcement Officers Arrive at your door?
If the tax bill remains unpaid, the next stage of enforcement action is for HMRC enforcement officers or third party bailiffs to arrive at your premises. Their intention will be to identify goods they can seize and sell at auction to recover the debt. At this stage, you can still make the payment in full, although an additional charge will be added to the debt.
Failure to pay the debt at this stage and the HMRC enforcement officers or bailiffs can take control of goods to cover the debt and their costs. They may secure the goods where they are or remove them, or they may offer a ‘Controlled Goods Agreement’, under which you keep the goods while you pay. The repayment terms of that agreement are negotiated with the agent. If the agent removes goods for sale, they cannot normally be sold until 7 clear days have passed from removal, and the agent must give 7 clear days’ notice of the sale, unless the goods would become unsaleable. Break the agreement and the enforcement officers can return to your premises, remove the goods and sell them at auction.
What are your Rights?
It is essential that throughout this process, you understand exactly what HMRC enforcement officers are legally entitled to do. To make an already confusing situation worse, you may have been visited by an HMRC enforcement officer or a third party bailiff. Their powers overlap, but not completely. Any enforcement agent may enter commercial premises peaceably. Using force to get in is where they differ. An agent enforcing a County Court or High Court judgment may use reasonable force to enter premises where the debtor carries on a trade or business, without a separate warrant. HMRC acts without a judgment, so HMRC or its agent needs a warrant from the court before using force to enter to search for and take control of goods. Once goods at your business premises have been taken into control, for example under a Controlled Goods Agreement you have then broken, the agent may re-enter without a further warrant. Where the agent acts for HMRC and reasonably believes you carry on a trade or business at the premises, the agent may then use reasonable force, if necessary, to inspect or remove the goods, without giving a further notice first.
Once they have entered your premises, HMRC enforcement officers can seize goods to not only cover the debt, but also the cost of the enforcement action. The law limits the goods taken to a value covering the debt and those costs, unless there are not enough lower-value goods available. But goods sold at auction very rarely fetch anything like their true resale price, so the goods you lose may be worth far more to you than they raise.
The enforcement officers list the goods they take control of. If you enter a Controlled Goods Agreement, that list forms part of it, but the agent does not have to offer one and may instead secure the goods on your premises or remove them. If you sign the Controlled Goods Agreement, you keep the use of the goods while you pay under the schedule you have agreed with the agent. The length of that schedule is a matter of negotiation, not statute. If you refuse to sign the agreement, the goods can be removed immediately. Once a Controlled Goods Agreement has been signed, you cannot sell any of the goods included in the agreement. To do so is a criminal offence that would only make your situation worse.
Can Enforcement Officers take Goods that Belong to you Personally?
No. A Limited company is a separate legal entity from the company directors, which means their finances are separate. Enforcement agents collecting the company’s tax debt can take only goods that belong to the company, not your own house or car. If the car is owned by the company, though, it can be seized to help satisfy the company debt. That does not make your personal assets safe in every case. HMRC can in some circumstances make a director personally liable, for example through a personal liability notice for unpaid National Insurance caused by fraud or neglect, or a joint and several liability notice. A personal guarantee you have given also makes you personally liable.
Need Advice?
Are you facing HMRC enforcement action for a debt you cannot pay? Are you unsure of your rights? Perhaps you’d like expert assistance when dealing with HMRC? For confidential and free advice, please get in touch with our team.