HMRC Spending More on Debt Collection

14th May 2018.

The amount HMRC pays to private-sector debt collectors has risen by more than 500% in three years, suggesting it may be stepping up the pressure on people who cannot pay their tax bills.

HMRC and British businesses have a small thing in common; late payers. The government body has experienced its fair share of excuses from taxpayers for why taxes have not been paid- read our blog for the boldest and strangest ones. As a result, the HMRC has turned to third parties for assistance, namely within the debt collection sector.

Within this shaky climate of penny-pinching consumers and profit-starved retailers, debt collection services have become increasingly important. Consumer credit may be dwindling but borrowing habits are still concerning economists and have left HMRC to take advantage of the sector’s resources and expertise.

At the Credit Protection Association, our debt recovery services have become more important to our members as the late payment culture tightens its grip on British businesses. Unlike most, however, we are also a credit management company with all the credit checks and status reports to protect our members as well as award them with more cash. Until consumers become conscientious enough to pay their taxes and suppliers on time, our services will remain significant to the health of the economy.

The amount HMRC pays to private-sector debt collectors has risen by more than 500 percent in three years, suggesting it may be stepping up the pressure on people who cannot pay their tax bills.

The figure rose to £39.1 million in 2017, which was 62% higher than the £24.1m that HMRC spent on these services in 2016, according to the accountancy firm UHY Hacker Young, which obtained the data.

Using a private debt collection agency is one of several ways HMRC chases outstanding taxes – it has a relationship with 12 different agencies that can pursue debtors on its behalf.

UHY Hacker Young said the sharp rise in spending on private-sector debt collectors “could suggest HMRC may be stepping up the pressure on people who can’t pay their tax bills as it continues its dash for cash”.

An HMRC spokesman said it had used debt collection agencies for a number of years as an “effective and efficient” way to collect tax.

He added: “They operate under strict codes of conduct to pursue debt and we expect them to uphold those codes at all times.

“Where someone thinks they will have problems paying the amount due, they should get in touch straight away. All requests for further time to pay an amount due are considered individually based on the facts of the case.”

Whether it is collecting taxes or business debt, approaching a third party debt collection agency can increase the chances of reaching a successful result. While numerous businesses prefer to maintain credit control procedure within their own four walls, debt collection agencies have the resources, the expertise and the time, to ensure all money is repaid.

Here at the Credit Protection Association, we have heard our fair share of excuses from debtors who have attempted avoidance of repayment. Our techniques and procedures are all based on the concept of maintaining goodwill between customer and suppliers, and we always keep communication with the debtor strictly polite and professional. We understand the importance of retaining a positive relationship and do what we can to keep it intact.

We are nevertheless firm with our debtors and investigate any contestations and attempts to dimiss responsibility of the debt. When dealing with credit control in-house, business owners can find it difficult to find the balance between the two, and this is one of the reasons we insist upon approaching third parties.

If the UK is to maintain a stronger financial position than its rivals, debt collection companies are recommended for businesses in financial difficulty. Aside from our highly efficient collection team at CPA, our credit checks and status reports also encourage our members to exercise more scrutiny over their own paperwork. This discourages the complacency that has historically led to confusion and crisis.