HMRC appoints ten debt collection agencies

TEN DEBT COLLECTION agencies have been appointed by HM Revenue & Customs to collect up to £1bn owed.

In a tender-award notice, HMRC confirmed that the contracts are worth £70m; the Treasury announced last year that agencies would collect up to £1bn a year. Four companies were appointed to undertake a pilot scheme in 2010-11 with the aim of collecting £140m a year.

The companies will collect smaller and older debts, with HMRC focusing its resources on larger liabilities.

Alec Pillmoor, a partner at Baker Tilly, warned this could lead to businesses folding: "The majority of people in business pay their tax on time and only ignore demands should they have insufficient funds. Accordingly, the concern is that the collection of these old and unbudgeted-for payments may be the final item that will break a business."

He added: "The debt collection agencies (DCAs) will only be paid for amounts collected and can therefore be expected to be more persistent than HMRC has recently been.

"Before a case is transferred to a DCA, the business will receive a letter from HMRC providing a last chance to pay. The taxpayer should take this opportunity to agree repayment terms with HMRC, as these may be more beneficial than could otherwise be negotiated with a DCA."

The successful companies this time around included Advantis Credit, Apex Credit, Close Credit Management, Clanchatton, Hillesden, Fredrickson International and Rossendales.

Commercial Collection Services, Fairfax Solicitors and iQor Recovery Services have been retained from the pilot scheme in 2010-11. However, Credit Solutions, a Surrey-based business, will not be appointed by HMRC, despite collecting debts in 2010-11.