24 Apr HMRC uses its power to seize assets for unpaid VAT
HMRC is stepping up its existing powers to seize assets for unpaid VAT bills.
HMRC has used its powers of ‘distraint’ to seize the assets of businesses in order to recover VAT from businesses that have failed to meet this tax obligation.
According to finance provider Syscap, HMRC has in fact doubled the use of this option – using its distraint powers to 4,746 times to speed up the payment of VAT. This is a 98% increase on the 2,401 times it used this facility in the previous year.
Syscap has warned that businesses that fail to pay their VAT bills risk their business assets being seized by the tax authority.
Syscap CEO Philip White, CEO said that small businesses need to be aware that HMRC is becoming more and more aggressive in claiming the VAT payments due.
‘Where it might have made some allowances in the past, it is now much less likely to relent in chasing the payments it demands. Businesses could previously find some respite in the “Time To Pay” scheme, which could grant a short extension to a tax deadline. HMRC’s use of that scheme has now dwindled significantly, which leaves a lot of businesses with very few options.’
‘Prior to the credit crunch, banks were offering more credit to SMEs, so businesses could fund their VAT bills through loans or overdrafts. Since then, however, capital adequacy rules have forced banks to rein in their lending, which has made it more difficult for SMEs to rely on bank funding alone.’
‘As VAT bills are payable on invoiced work rather than receipts, many businesses will find themselves paying tax on work they haven’t yet received payment for. These businesses are likely to have invested money up front in fulfilling contracts, putting further strain on available cash.’
Small businesses with heavy reliance on IT and machinery are the most vulnerable if HMRC decides to seize assets, Syscap says.
‘The power of distraint effectively means that HMRC can turn up and seize assets if necessary. Some businesses run the risk of losing business-critical IT assets and machinery.’
‘In addition, when seized assets are sold, they generally only bring in a fraction of their true value. This means that businesses may lose much more than the cost of their VAT bills.’
Source CCH online: 22nd April 2013
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