Why You Can Expect HMRC To Pursue The Debt They Are Owed

You can expect HMRC to pursue the debt they are owed because it is public money and it is a an involuntary creditor in almost every insolvency case. Whilst a company that is in trouble, directors may hope that some creditors might give up or write off the debt. Unfortunately, if one of those creditors is HMRC, this will not happen. HMRC is as like many creditors, persistent, and if your company owes tax, it’s wise to assume they will pursue it.

Public Duty To Pursue Taxpayer’s Money

HMRC is not a typical trade creditor that will necessarily apply commercial decision making into how it operates like a normal business. It’s the government’s tax collection agency, responsible for safeguarding public revenue. HMRC has a duty to collect the tax owed as part of its public role and it operates on the basis of government polices and strategies.

The money your company owes, whether VAT, PAYE, Corporation Tax or National Insurance, is considered public money. If HMRC were to turn a blind eye to unpaid tax, it would set a poor precedent and undermine confidence in the system of collecting in tax. Payment of tax is not a voluntary thing; it is mandatory.

So, while a supplier might walk away to avoid costly court action, HMRC will see enforcement as part of its core duty, hence why it has an enforcement division dedicated to pursuing the recovery of unpaid taxes due.

HMRC Has Strong Collection Powers

HMRC has extensive legal powers to recover debts, and it will without question use them. These include:

• Issuing Notices of Requirement for security deposits.
• Making personal liability notices against directors for unpaid National Insurance.
• Using distraint powers to seize business assets.
• Issuing winding-up petitions for unpaid debt.
• Engaging debt collection agencies or pursuing court judgments.

These tools make it easier and efficient for HMRC to act than many private creditors, which is why they do it routinely. It has economies of scale.

They Monitor Company Activity Closely

Unlike most creditors, HMRC has a direct line into your company’s affairs. They already know when PAYE and VAT returns are late, if a time-to-pay arrangement has failed. This internal data allows them to react by using the extensive information resource available to it. In fact, it’s often HMRC who trigger a company’s compulsory liquidation by filing a winding-up petition. It is the most common creditor to use this enforcement provision.

If your business has been delaying payments or filing erratic returns, it’s already very likely to be on HMRC’s radar.

Writing Off Tax Debt Is Rare

Yes, but not often is the answer to the question Does HMRC ever write off debt.

While HMRC may agree to a time to pay arrangement in some cases, it will not, however, agree to forgive or write off debt voluntarily. They may write off irrecoverable debts when a company is dissolved or enters liquidation, but that’s not a choice; it’s because they are no longer able to legally recover it.

Given its obligation to pursue matters, the answer to the question, can you write off HMRC tax debts is perhaps hopelessly unrealistic without formal insolvency proceedings. As a result, feel free to get in touch for a free initial consultation about the options available to you to clear HMRC tax debts.