# HMRC Debt and Enforcement Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-09-22 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: HMRC Debt Collection Strategy Amidst COVID-19 Recovery Meta Description: Find out how HMRC is restarting debt collection activities post lockdown, focusing on taxpayers least affected by COVID-19 and their strategies to collect URL: https://financedigest.com/hmrc-debt-and-enforcementhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/a-finger-adding-up-figures-using-a-calculator-isolated-over-a-white-background-sbi-301041837-1736837813859-compressed.jpg) ![](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/sushil-patel-1736837813764-compressed.jpg) _By **Sushil Patel,** Director, Restructuring Advisory, Kroll_ As lockdown measures have relaxed, HM Revenue and Customs (HMRC) has restarted debt collection activities with customers. It will initially focus on activities relating to collecting debts from customers who are least affected by COVID-19, those who are most able to pay their tax debts, taxpayers who have not responded to any correspondence or have not contacted HMRC to manage their account and arrears. According to the London Gazette, there has been a negligible number of winding-up petitions lodged by HMRC this year, going back to March 2020. Therefore, it seems likely that once HMRC is free to start issuing winding-up petitions again, the [numbers could rise](https://www.financedigest.com/ryanair-passenger-numbers-rise-in-august-to-11-1-million.html "Ryanair passenger numbers rise in August to 11.1 million") sharply. HMRC is likely to be under some [pressure to collect revenue](https://www.financedigest.com/pressure-ulcers-treatment-market-to-receive-overwhelming-hike-in-revenues-by-2027.html "Pressure Ulcers Treatment Market to Receive Overwhelming Hike in Revenues by 2027") for what is a much-depleted Exchequer. However, in light of the pandemic, enforcement of debt [remains a political decision and could lead](https://www.financedigest.com/flooded-battery-to-remain-top-choice-across-industries-accounting-for-49-0-of-lead-acid-battery-sales-in-2021-future-market-insights.html "Flooded Battery to Remain Top Choice across Industries, Accounting for 49.0% of Lead Acid Battery Sales in 2021: Future Market Insights") to further forbearance in certain instances. The graph below summarizes the levels of overdue [debt and as a % of revenue](https://www.financedigest.com/analysis-twitters-massive-revenue-drop-adds-to-heavy-debt-burden.html "Analysis-Twitter’s ‘massive’ revenue drop adds to heavy debt burden") since 2007: Overdue [debt](https://www.financedigest.com/understanding-company-debt-finance.html "Understanding company debt finance") after the financial crisis in 2008 was around £26bn. It has [reduced significantly](https://www.financedigest.com/white-bullets-collaboration-with-polands-sygnal-association-significantly-reduces-ad-funded-piracy-in-key-european-market.html "White Bullet’s collaboration with Poland’s Sygnał Association significantly reduces ad-funded piracy in key European market") over the last 10 years and averaged at around £13bn. However, overdue HMRC debt crept up to £19bn in March 2020 (and this is partly due to COVID) and it is now [expected to be around](https://www.financedigest.com/cherry-picker-crane-market-is-expected-to-experience-substantial-gains-with-projections-around-6-to-8-cagr-from-2021-to-2031.html "Cherry Picker Crane Market is expected to experience substantial gains, with projections around 6% to 8% CAGR from 2021 to 2031") £60bn in March 2021. Since 2011/12, overdue debt stabilized at an average of £13.6bn and at between 2% and 3% of revenue and was easily expected to be around [10%](https://www.financedigest.com/soccer-european-revenues-rise-10-in-2020-21-despite-covid.html "Soccer-European revenues rise 10% in 2020-21 despite COVID") of revenue in March 2021. HMRC has stated that the overdue debt balance was [impacted](https://www.financedigest.com/the-impact-of-debt-on-your-health-and-what-you-can-do-about-it.html "The Impact of Debt On Your Health, And What You Can Do About It") by the start of the COVID-19 lockdown and caused additional overdue debt of c £2.5 billion (which is included in the £19.0m overdue debt pile)1. HMRC fully expects there to be further substantial increases in the debt balance from 2020 to 2021 due to the ongoing economic [impact of the pandemic](https://www.financedigest.com/wework-rival-iwg-quarterly-revenue-dips-on-prolonged-pandemic-impact.html "WeWork rival IWG quarterly revenue dips on prolonged pandemic impact"). Therefore, HMRC will be under pressure to ensure these debts are collected and the Time-to-Pay (TTP) scheme will play a [key part](https://www.financedigest.com/auto-parts-cleaning-machine-market-the-report-gives-immense-knowledge-on-the-competitive-nature-of-key-players.html "Auto Parts Cleaning Machine Market: The Report Gives Immense Knowledge On The Competitive Nature Of Key Players") in this. HMRC’s [role as a preferential creditor in insolvency proceedings will also increase pressure for it to engage with businesses](https://www.financedigest.com/the-evolving-role-of-the-cfo-from-scorekeeper-to-business-partner.html "The Evolving Role of the CFO: From Scorekeeper to Business Partner") in a proactive manner. The chart below is a summary of the value of [debts that were agreed](https://www.financedigest.com/sovereign-debtors-creditors-agree-on-steps-to-jumpstart-debt-restructurings.html "Sovereign debtors, creditors agree on steps to jumpstart debt restructurings") under the TTP scheme by HMRC since 2013. From the end of 2019 to 2020, HMRC had £2.3 billion in TTP arrangements, supporting 648,000 taxpayers. HMRC is committed to being fair with debtors, which is reflected in the [low level](https://www.financedigest.com/optimism-levels-drop-to-low-of-17-percent-according-to-first-survey-since-banking-regulations.html "Optimism levels drop to low of -17 percent, according to first survey since banking regulations") of complaints received, compared to the size of debt pursuit activity. From 2019 to 2020 it [received 13% fewer complaints than the previous year](https://www.financedigest.com/glastons-interim-report-1-january-31-march-2018-orders-received-grew-23-comparable-operating-profit-at-previous-years-level.html "Glaston’s Interim Report 1 January – 31 March 2018: Orders received grew 23%, comparable operating profit at previous year’s level"). It is fully [expected that the TTP value for 2020/21 will be around the £8bn-£10bn level and this estimate](https://www.financedigest.com/valve-seat-inserts-market-was-estimate-to-be-valued-at-us-5-bn-in-2019-and-expected-to-grow-at-a-cagr-of-4-during-the-forecast-period-of-2019-2029.html "Valve Seat Inserts Market was estimate to be valued at ~US$ 5 Bn in 2019, and expected to grow at a CAGR of ~4% during the forecast period of 2019-2029") is based on HMRC’s historic bandwidth (and appetite) to agree TTPs under the scheme. The key questions will center [around how the enforcement of the estimated](https://www.financedigest.com/cellulose-derivative-excipient-market-is-estimated-to-reach-a-global-value-of-around-us-500-mn-by-the-end-of-2029.html "Cellulose Derivative Excipient Market Is Estimated To Reach A Global Value Of Around US$ 500 Mn By The End Of 2029  ") balance of c £50bn of overdue debt from March 2021 will be handled. Although enforcement processes are expected to commence at the end of September 2021, HMRC announced in July that its Field Force Team (FFT) has started visits to [businesses to assist in the collection of taxes](https://www.financedigest.com/5-common-tax-mistakes-small-businesses-make-in-australia.html "5 Common Tax Mistakes Small Businesses Make in Australia"). The FFT has special powers in repossessing goods and our Tax Arrears Solution (TAS) team can help businesses navigate through this legal process and negotiate [payment plans](https://www.financedigest.com/how-the-epa-plans-to-boost-confidence-in-the-uk-payments-industry-post-brexit.html "How the EPA plans to boost confidence in the UK payments industry post Brexit") with the FFT. A total of approximately 27% of [businesses that benefited from the Chancellor’s VAT](https://www.financedigest.com/how-choosing-the-right-mtd-for-vat-software-can-maximise-business-benefits.html "How choosing the right MTD for VAT software can maximise business benefits") deferral between March and June 2020 have failed to contact HMRC to pay the money they owe, even though the deadline to repay it or arrange a repayment plan expired on June 30, 2021. Approximately £2.7 [billion remains outstanding which will be subject to enforcement action](https://www.financedigest.com/facebook-faces-3-2-billion-uk-class-action-over-market-dominance.html "Facebook faces .2 billion UK class action over market dominance") from September 2021. In addition to the deferred VAT, which remains outstanding, it is likely many [businesses have failed to pay the associated pay as you earn (PAYE) and national insurance contribution (NIC) on the Coronavirus Job Retention Scheme (CJRS) claim of furloughed employees (the CJRS grant paid businesses the gross employee cost](https://www.financedigest.com/green-initiatives-cut-self-storage-business-space-stations-energy-costs-by-75.html "Green initiatives cut self-storage business Space Station’s energy costs by 75%") which includes the PAYE and NIC). The below graph shows the cumulative CJRS cost to HM Treasury: Source: 1 HMRC financial statements to March 2020 [https://www.gov.uk/government/publications/hmrc-annual-report-and-accounts-2019-to-2020/summary-of-hmrcs-annual-report-and-accounts-2019-to-2020](https://www.gov.uk/government/publications/hmrc-annual-report-and-accounts-2019-to-2020/summary-of-hmrcs-annual-report-and-accounts-2019-to-2020) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---