Asset seizures to cover business VAT bills increases 14-fold in five years
THE AMOUNT of companies that have had assets seized and sold by HM Revenue & Customs in order to settle VAT bills rose significantly during the recession.
According to data obtained by finance provider Syscap, the incidence of asset seizures rose 14-fold between 2008 and 2013, with 3,657 businesses having assets seized using its powers of ‘distraint’, compared to just 263 in 2008/9.
Distraint means that the taxman can remove goods or assets such as vehicles, machinery or IT equipment from business premises to sell off at public auction in order to settle unpaid tax bills. HMRC guidance states that it will start the process “as soon as possible” once it has written to companies concerned.
The method generated £92m for VAT in 2013, although Syscap suggests that the actual value of the assets sold is likely to dwarf this, because valuable assets such as stock or equipment are often sold at knock-down prices to achieve a quick sale.
Syscap chief executive Philip White said: “The fact that there has been such a significant increase in the use of HMRC’s powers to seize-and-sell assets to recover VAT during the recession will be a huge concern to SMEs who have been struggling to cope during the downturn.
“When assets are seized and sold at firesale prices, the actual cost to the business far outstrips the original VAT bill. HMRC is only concerned with recovering the tax it is owed, not achieving the best price.”