10 debt collection agencies to help HMRC collect overdue tax

Contractor accountants may be interested to learn that HMRC has appointed ten debt collection agencies to help it collect the billion pounds it is owed. The firms will focus on collecting smaller, older debts whilst HMRC will use its resources to chase larger liabilities.

Baker Tilly partner, Alex Pillmoor, has warned that the use of debt collectors could lead to some businesses closing. He pointed out that most businesses do pay their taxes on time and only get behind if they are short of money. The concern, therefore, is that pursuing old debts could be the final straw that closes a business.

Furthermore, the DCAs will be paid based on the amount they collect and therefore are likely to be more aggressive than the Revenue has been.

Before a case is passed on to a debt collection agency, HMRC will send a letter to the business providing it with a last chance to settle up. It would be advisable to take advantage of this and agree payment terms with the Revenue as these could be more beneficial than those negotiated with debt collectors. Businesses that find themselves in receipt of such a letter may want to contact their accountant for advice on how to proceed.

HMRC has been struggling to cope in recent years. Mistakes have been made with PAYE calculations and the government department has lost many staff members due to public sector spending cuts. But is the use of debt collection agencies really the best way to solve its problems?

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