Updated: 16th November 2020
Although HMRC are the most common creditor of businesses in the UK, falling behind on paying your taxes can pose a serious problem for your company. Repeated late or missed payments will not be ignored, and HMRC are relentless in chasing up delinquent payers even sending in bailiffs should the situation continue unresolved.
HMRC will not instruct bailiffs at the first sign of a missed or late payment. Instead you will be sent reminders, issued with late payment fines, and have interest charges added to your outstanding balance. During this stage you are highly advised to contact HMRC and discuss your current situation openly and honestly. It may be possible to negotiate a time to pay arrangement which would allow you to clear your HMRC debts through a series of monthly instalments. Be warned, however, the longer you ignore the problem, the less chance you will have of reaching a compromise with HMRC.
Bailiffs are used only as a last resort when other collection methods have tried and failed.
This is actually a complicated issue because technically, there is no such thing as a HMRC bailiff! HMRC use a number of third party bailiffs as well as their own enforcement officers. Enforcement officers are employed directly by HMRC and will carry an appropriate identity card. Bailiffs are not HMRC employees but are instructed by HMRC to undertake collection work on their behalf.
Whether you have been visited by an enforcement officer or a bailiff contracted by HMRC, their powers are extremely similar particularly when they have been ordered by the court.
You are not required to let a bailiff into your premises, however, if they have authorisation from the court then this changes. They cannot enter your home unless that happens to be your registered business address. In that instance, they are allowed to enter your property although entry cannot be forced and they must only seize goods which are owned by the company.
If the premises are solely commercial entry can be forced if they have authorisation from a Justice of the Peace. If the building comprises both residential and commercial units, the bailiff or enforcement officer needs to adhere to a set of additional rules.
Visits to a residential, or part-residential, property can only be done between certain hours (not between 9pm and 6am), and extra care must be taken if a vulnerable person or a child under 16 is present in the property at the time.
When an enforcement officer or bailiff acting on behalf of HMRC visits your premises, the main aim is to recover goods which can later be sold in order to pay off your debt. Unfortunately as seized assets are sold through auction, they typically fetch much less than their true market value. This means that the value of goods taken from your premises by bailiffs will often far outweigh the true cost of what you owe HMRC, as the lower resale value is calculated into what is seized.
Certain things cannot be taken by bailiffs or enforcement officers including safety equipment, livestock, goods on hire purchase, along with anything which cannot be removed without causing damage.
For limited company HMRC debts, bailiffs are only able to take property belonging to the company; anything owned by an individual, even if they are associated with the business, cannot be seized. This is thanks to the protection afforded by limited liability which creates a legal distinction between a limited company and its directors. It should be noted here than this only applies to incorporated companies and not individuals operating as sole traders. As there is no legal division between a sole trader’s business and their personal position, sole traders can find themselves being held personally liable for HMRC arrears and other debts accrued in the course of their business activities.
A Controlled Goods Agreement (CGA) is when an inventory of assets is recorded by the bailiff, but instead of the goods being taken away immediately, they remain on your premises until a HMRC agent returns to remove them. The breathing space offered by a CGA gives you an additional seven days during which to find the money to pay your tax arrears. Fail to do this and the assets subject to the CGA will be taken away and sold via public auction.
If you are having problems keeping up with your HMRC tax obligations, contact Real Business Rescue for help and support. Falling behind on paying tax is often a sign of deeper financial problems within a business. Our experienced insolvency practitioners will be able to assess your situation and advise on the most appropriate course of action going forwards. Call today on 0800 644 6080 to arrange a free no-obligation consultation.