Enforcement by HMRC

Her Majesty’s Revenue and Customs (“HMRC”) has the responsibility for not only administering the collection of taxes arising from earnings by all companies and businesses in the UK, but also to police compliance with the necessary tax regulations and prevent the avoidance of tax liabilities and general abuse of the tax rules by way of disguised remuneration.

This role is mainly performed by the following functions:

  1. The implementation and regulation of tax legislation to ensure ongoing compliance with the UK government’s tax strategy and objectives, including the investigation into company and business affairs, the imposition of penalties and the ongoing review to prevent future contravention; and
  2. To enforce payment, if required, via the imposition of penalties, security payments, accelerated payments and through legal enforcement processes and procedures.

Of course HMRC’s role is far wider than this, especially when dealing with fraud and the Proceeds of Crime.  However, for the purpose of this article we will consider how HMRC enforces payment through civil measures.

Ultimately directors themselves may become personally liable for such liabilities, and we refer to our webpages which deals with potential claims a director may face here.

What is the purpose of Enforcement?

You may ask yourself – what is the public interest of HMRC closing down a business which otherwise may have continued to pay employees, contribute and pay some taxes (or perhaps all but for historic tax debts) and continue to contribute to the UK economy? 

The answer to this is quite simple – by taking such strong action (which may end the life of a company or business) HMRC seeks not only to enforce the liability for the tax debt but also to protect the public from future non-payments. 

If there was no policy to procure such payments, everyone would stop paying (or pay less) and further unpaid taxes would continue to accrue as companies and businesses continued to trade using tax receipts to fund the business.  The longer term risk to the exchequer, and therefore the public interest, is greater.

It is this enforcement, regardless of the economic benefit of a particular step taken by

HMRC against a particular company or business, that ensures the integrity of the tax system.  It is only where trading difficulties, fraud or other unforeseen circumstances arise that enforcement normally becomes necessary.

Methods of Enforcement

Enforcement can be proactive, by taking steps to avoid a situation occurring or being repeated, or reactive, by taking steps to enforce payment of the outstanding tax liability. 

For HMRC, it is likely not the preferred route to spend endless time (and legal costs) litigating tax claims against companies who may then be placed in an insolvency process (usually liquidation).  However, in the absence of an alternative these extreme measures become necessary.

For this reason, HMRC has the following in its armoury to prevent tax losses, procure compliance and enforce payment/prevent further arrears:

  1. VAT Security Notices
  2. Accelerated Payment Notices
  3. Loan Charges and Transfer of Liability 
  4. Statutory Demands
  5. Winding-Up/Bankruptcy Petitions

At Francis Wilks & Jones we are able to assist with any of the above legal matters arising, whether it be the negotiation of security or payments sought by HMRC or defending proceedings brought against you or your business.

Please call any member of our Tax Disputes Team now for your consultation now on 0207 841 0390. Alternatively email us with your query at info@franciswilksandjones.co.uk and we will call you back at a time convenient for you.