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
  • Get to the point
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: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before