HMRC Enforcement Action Defence

HMRC, the UK’s tax authority, has been ramping up its enforcement activities and businesses and individuals alike are facing increased scrutiny and the risk of significant financial penalties.

HMRC can enforce tax debts against individuals and companies in a number of ways and it is imperative that you seek legal advice at the earliest opportunity to protect your position.

If you have received a statutory demand, you must act quickly (usually within 18 days) if you hope to avoid HMRC bankrupting you as an individual or applying for a winding up petition if you are a company. With debt enforcement by HMRC it is inevitable that unless action is taken the demand will eventually lead to the presentation of a winding up against a company or bankruptcy petition against an individual.

Our tax team work closely with our insolvency team to manage the HMRC enforcement process for you. Many specialist tax firms cannot offer dual expertise in both practice areas, but our firm can provide a bespoke solution to your individual circumstances be it with tax advice or insolvency solutions.

What is HMRC Debt Enforcement Action?

HMRC Debt Enforcement Action refers to the steps taken by His Majesty’s Revenue and Customs (HMRC) to recover unpaid taxes. When you owe the government money in taxes, they have the power to take action to collect the debt. These actions can range from relatively mild measures to more severe ones, depending on the amount of the debt and your cooperation. HMRC can take a variety of actions to recover unpaid taxes. These can include:

► Notices of Enforcement:

A Notice of Enforcement is a formal notification issued by a creditor, such as HMRC, to a debtor indicating the creditor’s intention to initiate enforcement proceedings to recover an outstanding debt. The notice typically outlines the nature of the debt, the amount owed, and the proposed enforcement action. It serves as a near final opportunity for the debtor to satisfy the debt or negotiate a repayment arrangement prior to the commencement of formal enforcement procedures. If you have received a Notice of Enforcement then get in touch with our leading tax lawyers for advice on next steps.

► HMRC Debt Management Unit (DMU) Calls:

The HMRC Debt Management Unit initiates outbound communications with taxpayers possessing outstanding tax liabilities. The primary objectives of these calls are to verify the debt, explore potential repayment arrangements, inform the taxpayer of potential enforcement actions, and address any disputes concerning the tax liability. HMRC adheres to strict protocols during these interactions, including explicit caller identification, disclosure of call purpose, and avoidance of soliciting sensitive taxpayer information via telephone. If you have had a call or email from this team you should consider taking urgent tax legal advice from our tax disputes experts.

► Time To Pay (TTP):

A Time to Pay arrangement is a formal agreement between a taxpayer and HMRC that permits the taxpayer to settle an outstanding tax liability through installments over a predetermined period. The arrangement is contingent upon the taxpayer’s financial capacity and is typically subject to regular review. Interest and penalties may continue to accrue on the outstanding debt during the TTP period. We are experienced in making TTP proposals and negotiating with HMRC to obtain payment by instalments.

► HMRC International Debt Unit:

This team often make contact with suspected tax defaulters by email or letter or calls. The HMRC International Debt Unit is responsible for the recovery of tax debts owed by non-resident individuals and businesses with international tax liabilities. The unit employs a range of debt collection strategies, including cross-border cooperation, asset tracing, and enforcement actions in collaboration with foreign tax authorities. Its primary focus is on maximising tax revenue collection from taxpayers with offshore interests. Get in touch with us – we are the leading law firm with decades of experience dealing with HMRC’s EU and Overseas Debt Collection.

► HMRC Statutory Demands:

A statutory demand is a formal written notice issued by a creditor, such as HMRC, to a debtor demanding payment of a debt. Failure to comply with the demand within the prescribed timeframe (e.g. 21 days) may result in the creditor initiating bankruptcy proceedings against an individual debtor or winding-up proceedings against a company debtor. The statutory demand serves as a precursor to insolvency proceedings and necessitates prompt attention and potential legal advice.

A statutory demand issued by HMRC against an individual may be challenged and set aside within 18 days if you can demonstrate a genuine dispute over the debt, a counterclaim, incorrect issuance, secured debt, or a debt below the threshold. This process involves making a court application including a draft order and supporting evidence and legal skeleton argument. Failure to challenge the demand successfully may lead to bankruptcy or winding-up proceedings, emphasising the need for timely legal advice. Companies facing a HMRC statutory demand will have to take other action such as in injunction to restrain HMRC.

► Taking Control of Goods (TCG):

Taking Control of Goods (TCG) is a formal enforcement action undertaken by HMRC or other creditors to recover unpaid debts. It involves the seizure and sale of a debtor’s assets to satisfy the outstanding debt. This process is carried out by enforcement agents, who have the power to enter premises, inventory goods, and remove items for sale. TCG is a significant step in the debt recovery process and can have severe financial implications for the debtor. Our legal team have acted to stop bailiffs in their tracks on several occasions.

► HMRC Winding-up Petitions:

A HMRC winding-up petition is a formal legal action initiated by a creditor against a company that owes it a debt exceeding £750. It is a serious step that can lead to the company’s bank accounts being frozen followed by compulsory liquidation. If successful, the court appoints a liquidator to sell the company’s assets and distribute the proceeds to creditors. This can lead to the directors being pursued for any wrongdoings by liquidators e.g. for overdrawn loan accounts. The petition process involves serving the company with a notice, advertising it in The Gazette, and a subsequent court hearing.

Responding to a winding-up petition is critical for a company’s survival. Options include negotiating a repayment plan with the creditor, seeking an adjournment of the hearing, challenging the petition based on disputed debt or procedural errors, or considering insolvency procedures like administration or a Company Voluntary Arrangement (CVA). It’s essential to seek professional advice promptly, as failure to respond effectively can lead to the company’s liquidation and significant consequences for directors and creditors.

We are the UK’s leading experts in defending HMRC winding-up petitions. We have the unique ability to provide very high quality tax disputes advice, tax tribunal representation and appeals, and elite insolvency defence advice and have 15 years of proven experience in this field. Get in touch with our expert winding-up petition defence lawyers.

► HMRC Bankruptcy Petitions:

A bankruptcy petition is a formal legal application filed by a creditor such as HMRC against an individual who owes them a debt exceeding £5,000. If successful, the court will declare the individual bankrupt, and a trustee in bankruptcy will be appointed to manage their financial affairs. The trustee will gather and sell the bankrupt’s assets to distribute the proceeds to creditors. Bankruptcy has significant consequences, including restrictions on financial activities, credit implications, and potential loss of assets.

Responding is critical, an individual may oppose the petition if grounds exist, negotiate a settlement with the creditor, explore alternative insolvency options, or seek professional bankruptcy advice. Prompt action is crucial to protect interests and potentially avoid bankruptcy.

► Charging Orders:

Placing a charge on your property, meaning it can’t be sold until the debt is paid. An HMRC charging order is a legal instrument that secures a tax debt against a property owned by the debtor. It grants HMRC a charge over the property, meaning that if the property is sold, the tax debt must be repaid from the proceeds before any funds are distributed to the debtor. A charging order does not force the sale of the property but acts as a financial encumbrance on the property title.

► Attachment of Earnings Orders (AEO):

These allow HMRC to deduct a portion of your wages to repay a tax debt by taking money directly from your bank account. An Attachment of Earnings Order (AEO) is a legal instrument that allows a creditor, such as HMRC, to deduct a portion of a debtor’s earnings directly from their employer. This order is typically obtained by a court and mandates the employer to withhold a specified amount from the employee’s wages and remit it to the creditor. The amount deducted is subject to legal limits to ensure the debtor retains a sufficient income for living expenses.

► Freezing Orders:

Preventing you from selling assets or transferring money. A Freezing Order, also known as a Restraining Order, is a court order that prevents an individual or company from moving assets or disposing of property. It is a powerful tool used by law enforcement agencies, including HMRC, to preserve assets that may be subject to forfeiture or recovery.

HMRC has increasingly employed freezing orders when HMRC suspect that assets are connected to criminal conduct, tax evasion, or fraud. Once a freezing order is in place, all funds within the frozen account are inaccessible until the order is lifted or varied by the court.

It’s crucial to note that obtaining a Freezing Order is a serious matter, and HMRC must provide sufficient evidence to justify the order and an undertaking to provide compensation in the event their suspicions prove wrong. If you are subject to a freezing order, seeking legal advice promptly is essential to understand your rights and potential options.

► Account Freezing Orders (AFO):

An HMRC Account Freezing Order (AFO) is a court order that restricts access to funds in a bank account suspected of being linked to criminal activity, for example tax evasion or money laundering. HMRC can apply for an AFO if they believe there is a reasonable suspicion that the account holds funds connected to unpaid taxes.

These orders are a powerful tool for HMRC to prevent the dissipation of assets while investigations are ongoing. However, they can have severe financial consequences for individuals or businesses affected and lead to business collapse. If you are subject to an AFO, seeking legal advice is crucial to protect your rights and explore potential challenges or variations to the order.

We have experience of challenging HMRC AFOs successfully and seeking multimillion pound compensation as a result of AFOs obtained by HMRC by giving “appalling misrepresentations” to regional magistrates in Somerset.

► HMRC Security Notices:

An HMRC Security Notice is a formal demand for a taxpayer, usually a business, to provide financial guarantees against future tax liabilities. Issued when HMRC perceives a risk of non-payment, it requires a cash deposit, bank guarantee, or insurance bond. Non-compliance can lead to severe consequences, including enforcement action. Prompt professional advice is crucial to understand options and potential implications.

We provide leading advice and defence on HMRC Security Notices ensuring that directors and their companies are well protected from unreasonable security notice demands issued by HMRC.

► Recovery of EU Taxes by HMRC (MARD)

Mutual Assistance in the Recovery of Debt (MARD) is a mechanism enabling EU member states to cooperate in tax debt recovery. If a taxpayer owes tax in one EU country but resides or holds assets in another, the first country’s tax authority can request assistance from the second to collect the debt.

HMRC’s MARD office (now part of HMRC International Debt Unit) acts as a collection agent for other EU tax authorities under MARD, employing the same enforcement methods as for UK tax debts. However, strict rules govern this process, and taxpayers have rights. The UK’s withdrawal from the EU will gradually phase out MARD, with the final deadline being December 31, 2025.

► HMRC International Debt Unit – Overseas Tax

The HMRC International Debt Unit is responsible for recovering overseas tax debts owed to the UK government. This involves complex cross-border cooperation via MARD regulation and OECD MAAC convention treaties with foreign tax authorities to locate and seize assets belonging to tax defaulters. The unit employs a range of strategies, including information exchange, asset tracing, and enforcement actions in collaboration with foreign law enforcement agencies. Successful recovery often hinges on strong international relationships and a deep understanding of foreign tax laws and legal systems.

Our HMRC Tax Defence Lawyers can help…

As a leading specialist tax law firm with a track record of success, you can be assured your tax matter is in safe hands. Our success rate is a result of the dedication of our tax team who will diligently review your matter so it has the best possible chance of success from the outset when it matters the most.

Our experienced lawyers regularly carry out work in many tax disputes areas,  from advising clients on whether HMRC have followed the correct procedures to successfully challenging HMRC’s policies. We have specialist knowledge in HMRC internal processes as well as ensuring that we are able to successfully challenge HMRC decisions in the Tax Tribunals.

Although you may have instructed an Accountant in relation to your tax matters, in most cases your Accountant will be able to assist you in tax compliance matters whereas we specialise in assisting you in relation to any investigations that HMRC have brought against you. We regularly work with Accountants to ensure that collectively we are able to obtain the best possible resolution to your matter.

If you have a dispute with HMRC and find yourself hitting a ‘brick wall’ or even if you are unsure of how to deal with correspondence and/or demands you have received from HMRC  then you should contact us immediately to ascertain how we can assist you in your matter.

Not in London? We provide nationwide and international representation

That does not matter, we will represent you against HMRC no matter where you are based in England or Wales or overseas.

If you contact us through our contact form, by email or by phone, one of our tax team members will contact you to discuss your matter and assess whether we can help you. We can then on-board you as a client and arrange a fixed fee conference video meeting with a senior member(s) of our tax team.

Due to the number of daily enquiries we cannot provide any free legal advice and we do not work on low value cases.

Discounted Fixed fee initial consultation

If you need HMRC Debt Enforcement Defence advice we are able to assist. We invite you to contact us so we can assess your claim. We can subsequently provide urgent help, advice or representation to clients from our expert legal team of leading Tax solicitors and barristers. Just call or email us now for a heavily discounted initial consultation; our legal team are waiting to help.