New figures show that amount of assets seized from the self-employed by HMRC, using its controversial powers of ‘distraint’, has reached a new high.
The number of businesses affected is growing – 1,488 were targeted over the past year, up by 8% on 2011/12 figures, and more than double the number affected in 2010/11.
The powers of distraint allow HMRC to arrive at business premises, unannounced, in order to collect unpaid taxes. Typically, a business will be then given five days to pay their overdue bill, alongside any penalties and interest. If payment is still not forthcoming, HMRC can then return to the premises, and seize assets, without the need to secure a court order.
Although this forceful method of debt collection was previously reserved for firms who failed to pay their payroll tax liabilities, HMRC has increasingly used its powers to recover other types of tax debt, including self assessment liabilities.
Alternative finance provider, Syscap, says that business owners who miss the 31st January self-assessment deadline could find themselves facing action from HMRC, if they fail to secure business funding in time.
Philip White, the firm’s SEO said, “If HMRC seizes a company’s assets, there is a good chance that it could be a fatal blow. A small business that loses valuable machinery, vehicles or IT systems is likely to find it extremely difficult to continue trading.”
Worse still, the value of any seized assets may well not be sufficient to cover any outstanding tax liabilities, as they will typically be sold at auction at heavily discounted prices.
In recent years, the Government has been less forgiving when it comes to late payment of taxes, by both individuals and businesses. Under HMRC’s ‘Time to Pay’ scheme – set up following the credit crunch, businesses were allowed to defer tax payments under certain conditions. The scheme has since been ‘virtually wound up’, and HMRC have been tasked with increasing its total tax take by £7bn over the next tax year.
All company directors, and the self employed must complete a self-assessment tax return each year. If you’ve not yet registered, read our tax return guide to find out what the penalties are for late payment, and how to register for HMRC online services.