One of HMRC’s many powers is the ability to seize the assets of businesses that are unable to pay their tax bill in cash. Last financial year, they did this to 2,833 businesses. This is an increase of 45% on 2016-17 tax year and is quadruple the number of 2014-15.
At a time of uncertainty, rising interest rates and the potential impact of leaving the EU, this is really not good news for struggling British businesses. Business owners already bear the burden of business rates, corporation tax, wages, NICs and pension payments for employees; as well as their own salary’s income tax.
Why does HMRC seize assets?
It is the same philosophy as a bailiff with a debt collection agency. If a business does not have the money to pay their tax bill, after a certain time period, HMRC are entitled to take their assets. The idea is that HMRC gets at least part of the tax bill paid by selling these items.
What is included as an asset?
A businesses assets are any items owned by the company. This could be computers, machinery and other physical things that the business uses in order to operate.
Why is there a problem with asset seizing?
Whilst you may have sympathy with any business owner in this situation, it may seem like a ‘harsh but fair’ policy to some extent. But taking a company’s assets basically removes any chance it has to make the money to pay the current tax bill and continue to function into the future.
As reported by The Independent, Chief Executive of Funding Options, Conrad Ford said: “HMRC is jeopardising the future of these businesses by removing their assets. There are often genuine reasons why these firms aren’t able to pay their tax bills on time, such as cashflow issues stemming from late payments from clients. There may be a better way for HMRC to recover the tax than removing a business’s vital assets. Cashflow difficulties that mean a business cannot settle its tax bills should not spell the end for them.”
There is also the argument that HMRC don’t really raise that much money from the sale of these goods. Last tax year, HMRC only made £67.9m from selling off seized assets because they were going for “fire-sale prices”. Considering that this is during a year with a 45% increase in business asset seizures, perhaps it’s time to adopt another approach.
What other strategy could be used?
Simply allowing businesses more time to repay their tax bill could save many of them from going under completely. Particularly if their predicament is caused by late payment from customers. Perhaps a more lenient, positive approach to this financial problem is a better way forward. By spreading payments over time at a sensible rate, HMRC always gets paid the full amount of tax and companies can keep trading. Businesses that continue to operate generate income and provide employment, and that’s just better for everyone.