HMRC seizing assets of late paying businesses

A North West accountancy firm has warned small business owners that they should tighten their credit control management, as it has emerged that HMRC is increasingly resorting to asset seizures to tackle late paying businesses.

MD of Mitchell Charlesworth, David Darlington, said the number of occasions when HMRC has used its powers of distraint to seize the assets of late payers – overwhelming businesses – rose to more than 7000 in the last financial year, up from nearly 4,900 the previous year and 1,675 in the year before.

HMRC adopting a more aggressive approach

“These statistics show a far more aggressive attitude from HMRC and we do urge firms to tread with care,” he said. “HMRC is under greater pressure to raise cash as the Government seeks to make cuts and maximise tax revenue. If firms are worried about cash flow, and managing their relationship with HMRC, we advise taking professional advice at the earliest opportunity. Failure to get cash flow right, and failure to pay tax bills on time, could well result in your assets being seized. This could prove extremely disruptive and damaging to any business.”

Review your credit control management

Mr Darlington also advised small firms concerned about paying tax on time to review their credit control procedures.

“In terms of credit control there are a number of actions a firm can make to ensure cash flow is strong,” he said. “If HMRC is going to chase you harder and seize your assets then you need to chase your invoices harder. We advise checking the credit rating on all new and existing clients and customers to assess their health and performance. We then advise asking all clients to pay by standing order, or direct debit, rather than cheque so you have a nailed down payment date which cannot be pushed back. If a customer refuses to do this make clear what your payment terms are and consider suspending work or charging interest until payment is made.”

Set in place late payment procedures

Mr Darlington said it is further wise to have a set procedure for chasing payment as soon as the invoice has been sent.

“Check immediately with the customer it has received your invoice and ask when you can expect payment,” he said. “This lets them know you are on the case and are alert to any potential problems. It is critical that the client is aware that you are prepared to chase payment hard. That way they are more likely to pay your invoice before invoices which are not being chased.”