HMRC doubles use of debt collectors: should you worry?


man showing an empty wallet

An accountancy firm has revealed that HMRC has doubled its use of private sector bailiffs and debt collection agencies over the last two years - as it takes more aggressive action to chase overdue tax. Last year it spent an eye-watering £14.8 million on the use of private sector debt collectors.

So should we be worried?

Private sector debt collectors were first bought in five years ago, but their use has snowballed - and it now has 12 private companies on its books. If a taxpayer is overdue, they may suddenly start receiving telephone calls, letters and text messages from any one of these companies.

From their point of view, it makes perfect sense. They are under pressure to meet tough targets to reduce the amount of tax owed and help bring down the deficit, so it's a worthwhile expense to bring private companies into the fold.


However, UHY Hacker Young (who did the research) point out that private sector debt collection agencies could be far more aggressive in their efforts to collect overdue tax. Mark Giddens, Head of Private Client Services, said: "Bailiffs do not have the best of reputations and many taxpayers are going to be very alarmed when a debt collector is brought in."

HMRC has a number of powers to collect these debts. They can collect them through your PAYE code if you are in employment or receive a pension.

Alternatively, they have the right to take legal action which would add to your costs and end up with a visit by the bailiffs. They also have the right to start bankruptcy proceedings against an individual or business if they believe they are insolvent.

There's every chance that this information will be used to put people under pressure when they are contacted by debt collectors - which would be incredibly distressing.

Giddens warns that chasing the debt may achieve very little - except for increasing the stress the taxpayer is already suffering. He points out: "Most taxpayers who are behind with their payments are in that situation because they simply can't afford to pay their tax – not because they intend to string HMRC along."

Giddens adds that using an external company brings the potential for problems in communication: "There is the danger of mistakes in communication between HMRC and its agencies, with taxpayers being incorrectly chased for debts. Any errors that do arise would be far easier to rectify if the process was kept in-house."

What can you do?

If you are facing problems paying your tax bill, HMRC emphasises that you need to get in touch with them sooner rather than later, and they may be able to extend the period of time in which you have to pay your debts. Some 650,000 of these arrangements are currently in place.

They say that if you ignore demands they will not go away, and that: "The longer you delay contacting HMRC the less likely HMRC is to allow you any extra time and the more serious the consequences are likely to be."

Of course, in the future the debt collectors could be the least of your worries - because they are proposals to give HMRC the right to take whatever is owed directly from your bank account.

Giddens warns: "There are real fears that these controversial changes could result in the wrong people being targeted. HMRC's databases may not be fully up to date and money could be wrongly taken from accounts."