HMRC’s use of powers to seize business assets grows four-fold

HMRC has massively increased its use of powers, allowing it to seize the assets of late-paying businesses in an urgent effort to increase its tax take, a new report has revealed.

Data obtained by law firm McGrigors shows that the number of times HMRC has used its powers of distraint to seize assets of late-payers has quadrupled in the last two years, rising from 1,675 cases in 2009 to 7,004 in the year to April 2011.

The law and tax specialist firm points out that in some cases, HMRC’s use of distraint “may be over-zealous” in seizing the very assets that a business needs to trade through its difficulties, and effectively forcing some companies into insolvency.

McGrigors partner Stuart McNeill, explains: “HMRC is under huge pressure to collect unpaid tax, but at the same time they are facing cuts in their staffing levels...It is almost inevitable that this is resulting in a more aggressive approach and short cuts.”

Without making a proper commercial assessment of the firm’s medium term viability, “HMRC risk sacrificing full payment in a few months’ time for far less cash up front,” said McNeill.

A spokesman for HMRC responded: “Only a very small number of businesses who have long term outstanding tax debts are collected in this way.”

“We support businesses in genuine difficulty through allowing time to pay whilst taking firm but proportionate action against those who don’t pay.”