The Taxman Toughens Up

Over the past two years, we’ve noticed a more vigorous approach from HMRC when it comes to collecting business taxes.

The reason behind this uptick in activity  is undoubtedly down to HM Treasury looking to offset the effects of its decreasing tax receipts by optimising the collection methods of its enforcement arms.


The effect has been swift and stark


In the 2010/11 tax year, HMRC issued 3,367 winding-up petitions, whilst in 2011/12 there were 5,302 issued. Just looking at the increased activity we’ve seen this year, we wouldn’t be surprised if the figure reaches 7,000 for this tax year. 


While other government departments have seen large cuts to funding, HMRC’s investigations unit has seen it’s budget increased with £917 million in extra funding awarded. 


The reason is simple – the Treasury expects HMRC to generate a further £7 billion in recovered taxes that would otherwise have gone uncollected.


The immediate impact of this is that official investigations into businesses and their owners and directors are likely to sharply increase whilst accompanying legal actions will be launched quicker and be more thorough. 


Another important change will be the introduction of the new RTI payroll collection method which we believe will lead to a higher level of insolvencies and defaults. 


Previously some businesses might have historically underpaid their PAYE/NIC contributions as a form of soft funding and improving their immediate cash flow but with the introduction of RTI, this practice will be riskier and more difficult. 


An emboldened HMRC will look to bring more recovery action in the immediate and medium term. 


Where they believe there are saleable assets, their preferred choice will be to assign bailiffs to visit the company’s premises to distrain over the company’s assets. If no agreement can be reached then they will uplift and sell. 


If there aren’t any obvious or valuable assets to uplift then they will likely look to issue a winding-up petition to place the company into compulsory liquidation which will happen more often and quicker than in previous years.


If they feel that fraud has been committed then they will issue more Code of Practice 9 (COP9) investigation. These can be quite frightening experiences and anyone who receives a notice should seek advice as early as possible as the personal ramifications for business owners can be terminal. 


If your business is in default with taxes or if HMRC have issued a winding-up petition or in the worst case scenario a COP9 investigation then you need to speak with experts as soon as possible. 


Robson Scott has years of experience negotiating and working with HMRC and has a good track record of creating strategies and solutions that satisfy both our clients and HMRC.