HM Revenue and Customs has appointed 10 debt collection agencies (DCAs) to recover £1 billion in debts.
It was announced in the June 2010 Emergency Budget that, following a successful pilot, HMRC would use private debt collection agencies operating under industry and HMRC standards to boost HMRC’s debt collection capacity and help the pursuit of lower value debts.
In 2010/11 HMRC said that DCAs would attempt to collect an extra £140 million in tax, with the proviso that it would only refer a case to an agency after writing to the debtor to provide a last chance to pay.
Before the case is transferred to a DCA the taxpayer is recommended to take this opportunity to agree repayment terms with HMRC, as these terms may be more beneficial that could otherwise be negotiated with a DCA.
The pilot scheme employed four debt collection agencies and, together with a far tougher stance on liquidating companies and bankrupting individuals for non-payment of tax debts, proved to be such a success that HMRC decided to extend the number of debt collectors.
More than 40 debt collection companies tendered for the business, worth up to £70 million in fees. The successful 10 agencies will enter a two-year arrangement with HMRC.
It is understood that the DCAs will still be collecting relatively small and older outstanding liabilities, in line with the pilot scheme.
There have been concerns in some quarters, however, that the use of DCAs could lead to businesses going into liquidation, as the enforced collection of old and unbudgeted-for debts might be the straw that breaks the camel’s back.
Some experts are also worried that some vulnerable people could be harassed over relatively small amounts.
For further information about DCA’s please contact Emma Legdon, Business Recovery & Insolvency Manager, on T: 0114 251 8850.
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