HMRC has almost doubled its use of powers to seize businesses’ assets in order to settle late VAT bills in the last year.
According to Syscap, the finance providers, HMRC has used its powers of distraint to seize business assets – 4,746 times to collect VAT in 2012. This represents a 98% increase on the 2,401 times it used these powers to recover overdue VAT in 2011.
It goes to show how important it is to collect money in from debtors as VAT is often payable when the invoice is issued rather than when it is paid. You can opt to pay only on receiving payment but then you can only claim back VAT after you have paid your suppliers - This is known as cash accounting
For help on how to collect debts in refer to our pages on debtor collections
What can you do about distraint?
Effectively if you do not reach a deal or pay in full the field officer or their agents can remove and sell the assets in 5 days. To sell the assets, after they are covered in this way is a criminal offence. If the bailiff has obtained a walking possession he can force entry to recover the goods after the 5 day period.
Threats of distraint or legally taking possession of goods should not be ignored. If you do not agree that you owe the tax demanded, you should tell the HMRC officer, but you will find that he/she is in a non-negotiable position once he/she is on the premises.
So, if you have a distraint threat or have been visited by an HMRC officer or bailiff , then you must ACT. In the event that the business is not viable going forward call us and we can put the company into liquidation quickly and lower the risk of personal liability.
It may be that you will be able to negotiate time to pay VAT going forward but you will need to pay the outstanding very quickly