Distraints up fourfold in two years as HMRC gets tough

The number of companies whose assets have been seized for late payment of tax has risen fourfold in the last two years. The number of times when Her Majesty's Revenue and Customs used its powers of "distraint" was 7,004 in the 12 months to April 2011, up from 1,675 in the year to April 2009.

The figures were unearthed by the commercial tax law firm, McGrigors. HMRC is one of the few bodies in the UK that can legally seize assets without a court order. In 2003 HMRC lost its preferred creditor status, which had ensured the tax office would be paid in full ahead of other companies when firms went into administration or liquidation. McGrigors says this might have prompted HMRC to use its distraint powers more aggressively.

Stuart McNeill, a partner at McGrigors, said: "HMRC, having lost preferred creditor status, may be using its sheer size and muscle to jump to the front of the queue, damaging other creditors' chances recovering debts in the process." Mr McNeill also argued that the increased use of distraint by HMRC could be counter productive. He said: "By barging in and selling the assets of a late paying company without making a proper commercial assessment of the firm's medium term viability, HMRC risk sacrificing full payment in a few months' time."

In November 2008, at the height of the recession, HMRC extended its 'time to pay scheme', to ease pressure on cash-strapped businesses.

But in August, HMRC ceased to publish figures indicating the level of demand for the scheme, which prompted tax professionals to speculate it was being wound down. Figures released by HMRC in July showed that a total of 15,490 time-to-pay arrangements were agreed in the second quarter of 2011 compared to 30,160 in the second quarter 2010, a year-on-year reduction of 49 per cent.

HMRC denied that it was exercising its distraint powers too aggressively. A spokesman said: "HMRC purely uses its powers to seize assets of businesses who owe us tax when all other avenues have been entirely exhausted. Only a very small number of businesses who have long term outstanding tax debts are collected in this way.

The vast majority pay in full and on time, so it is only fair that for those businesses who choose not to pay that we take appropriate action to collect any tax owed."

A report by the Treasury Select Committee in July into the administration and effectiveness of HMRC found considerable dissatisfaction among the public and tax professionals with the service provided by the department. The committee warned that this was in danger of undermining respect for the tax system.

Last month, HMRC revealed that 6 million people are set to receive tax rebates averaging £400, while another million will learn they have underpaid their tax by about £600.

This is the second year in a row that tax and National Insurance discrepancies have been identified by a new HMRC computer system.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
TV
Voices
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Sport
Steve Bruce and Gus Poyet clash
football
News
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
TV
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths
ebooks
ebooksA special investigation by Andy McSmith
Life and Style
life
Sport
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
News
Amazon misled consumers about subscription fees, the ASA has ruled
news
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Austen Lloyd: Law Costs HOD - Southampton

£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

SThree: Recruitment Resourcer

£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn