The taxman has clashed with advisers on the issue of debt collectors pursuing
tax bills which may not be due for payment.
This comes alongside the announcement in July that HMRC would start to use
debt collection agencies in 2010-2011 in a bid to collect an extra £140m in tax.
Alan Boby, tax partner at chartered accountants Ellacotts, flagged up the
case of a client who pays PAYE and national insurance to HM Revenue &
Customs on a quarterly basis instead of monthly.
This simplified method is allowed for businesses whose payments fall below a
threshold of £1,500 per month.
However, Boby said his client had been contacted by HMRC’s debt collection
division on 15 September, a month before their latest quarterly payment of
around £700, which is not due until 19 October.
When Ellacotts approached HMRC on their client’s behalf, they were told that
demands for unpaid PAYE and national insurance for PAYE months four and five –
July and August 2010– had gone out and the client had been wrongly caught up in
On the strength of this, thousands of small businesses across the country
could find themselves pursued unnecessarily, the UK200Group warned.
“I accept that HMRC should tighten their debt collection procedures for
taxpayers who do not pay on time,” Boby said.
“However, I believe that nobody has legal grounds to chase a debt that is not
However, Boby said the case that had been brought to light was not an
There have only been a handful of cases ,according to the tax expert but it
had still led to HM Revenue & Customs issuing internal instructions to their
offices informing them that demands had been made by mistake for monthly PAYE to
employers who only needed to pay quarterly.
“At this stage it is hard to say what has triggered the problem but it seems
likely that recent changes to the debt collection system did not properly take
into account those businesses that have a right to pay over PAYE on a quarterly
basis,” Boby said.
HMRC rejected the concerns, adding that the external debt collectors agencies
which have been tasked with bringing in £140m of unpaid bills only chasing older
liabilities known as “legacy debts”.
“HMRC does not recognise the scenario described,” the taxman said.
“We can confirm that no current PAYE debts whatsoever have been placed with
debt collection agencies.”
Furthermore before any debt is passed to a DCA a ‘final opportunity to pay’
letter is issued – only if that is ignored would the debt be passed to an
HMRC has internal debt collection departments called ‘local recovery
They do not generally outsource debt collection to outside agencies but it
was not uncommon, Boby said, for instances where the recovery offices have been
“let loose” to demand tax that is not due.
“If these mistakes are being caused by a fundamental systems problem then,
clearly, recovery offices should not be making demands if they cannot be sure
that an employer has failed to file a tax return or pay tax on time, ” Boby
Changes to the tax system is urged to support the growth of entrepreneurs, found a report from the Grant Thornton UK, the Institute of Directors, and the Prelude Group
The EC has been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states
Government's estimate of a £400m admin saving from Making Tax Digital is way off - and is instead a huge cost burden, warns Lamont Pridmore chief executive Graham Lamont
HMRC is continuing to ramp up the number of raids on premises it carries out as part of criminal investigations, searching 761 properties in the last year