Taxman takes tougher line on struggling businesses

In a clear sign of a more aggressive approach from HM Revenue & Customs, the tax authority used its powers of “distraint” on companies almost 11,000 times over the 12 months to April 2012. This compares with just 5,520 comparable cases in the previous year.

The powers allow HMRC to visit a company’s premises without warning in order to collect unpaid taxes. Companies then have five days to settle their bills or face having key assets removed and sold – all without a court order.

Leasing firm Syscap, which obtained the figures, said the taxman is now using this method to collect a broader range of outstanding bills. While typically used to tackle unpaid payroll-related taxes, Syscap said overdue corporation tax bills are increasingly being tackled through distraint.

Philip White, chief executive of Syscap, said: “If a business’s assets are seized and it can no longer fulfil customer orders, then that could easily and quickly spell disaster.

“HMRC is unlikely to be able to auction off the assets at anything like their real value to the business, and the proceeds of the sale may not even cover the outstanding tax bill. In those circumstances the business would still face court action to recover the balance.”

HMRC showed leniency towards many businesses during the financial crisis, with its so-called Time to Pay scheme allowing companies to defer payments.

However, the number of firms being refused access to the scheme began to rise rapidly in 2011.

Mr White said: “We are hearing that it is becoming far harder for businesses to negotiate a grace period through [Time to Pay].
“All the evidence now points to a much harder line from HMRC, at the same time that businesses are still unable to rely on the availability of bank loans and overdrafts.”