January 24, 2014 - Rachel Miller
HM Revenue and Customs (HMRC) seized assets from a new high of 1,488 self-assessed taxpayers in the past year – the majority of whom are self-employed professionals such as accountants and solicitors.
The figures, highlighted by Syscap, indicate that self-employed people who owe tax to HMRC are increasingly likely to have their assets seized. This latest year saw HMRC's most frequent use of its power of "distraint" against self-assessment tax debts on record – representing an 8% increase on the 1,376 seizures in 2011/12, and more than double the 730 seizures of 2010/11.
Syscap is advising the owners of small firms and the self-employed to resolve cashflow or funding problems before the January 31 tax deadline. This deadline, it says, could trigger another wave of enforcement action as small firms struggle to pay tax bills.
HMRC's power of distraint allows its staff to visit business premises without warning in order to collect unpaid taxes. If the bill, usually including interest and penalties, is not paid within five days, HMRC can remove and sell business assets such as computers, vehicles and other key equipment, without a court order.
Philip White, CEO of Syscap, said: "HMRC is more likely than ever to take a draconian approach to tax debts. 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."
He added: "Those seized assets may not even turn out to cover the cost of the tax debts, as HMRC is likely to auction them off at deeply discounted prices. The affected business could still face legal action to recover the remainder of the debt."
At the height of the recession, HMRC allowed businesses a grace period under its Time To Pay scheme, however that has now been virtually wound up and HMRC is targeting an overall revenue increase of £7 billion per year by 2014/15.