HMRC Direct Recovery of Debt Changes

Updated: 13th January 2021

HMRC increases debt recovery powers by accessing bank accounts

In its 2014 Budget, the Treasury announced that it would give HM Revenue & Customs (HMRC) power to recover taxes owed by corporate and individual debtors directly from their bank accounts. Issues relating to how these powers might and should be used in practice are being consulted on and considered by government but the rule changes bring into focus the importance for businesses of staying in the good graces of HMRC.

Here is our look at some key issues that can affect a company’s position with regard to debts owed as taxes:


Among the clearest hazards to businesses in the context of their efforts to avoid running up debts with HMRC is ‘overtrading’. The term refers to a position in which a company finds its cash flows being notably squeezed at a particular point in time.

The issue of overtrading is a common one where an economy is expanding and a company is keen to take advantage of growth potential but struggles to see its financial incomings keep pace with outgoings.

Overtrading can easily become a problem for companies in any industry but particularly for those, such as manufacturers and exporters, who need to pay out relatively large sums of money upfront for raw materials in order to generate turnover and profits later down the line.

The basic problem under these circumstances is that a company can find itself being owed large amounts of money that they can’t access in time to settle outstanding debts with HMRC. And, as we now know, the new laws mean this could become a real problem with the Crown now able to recover these debts directly from bank accounts.

Accelerated payment notices

Another way in which a company can easily find itself owing and unable to pay significant amounts of debt to HMRC is by not being adequately prepared for accelerated payment notices. These notices can be issued by HMRC as demands for payment from companies that are involved in tax planning schemes that are deemed to have been created effectively for purposes of tax avoidance.

The powers to send out accelerated payment notices were given to HMRC by legislation brought in by the UK Parliament in July 2014. Where a company is believed to have saved money by avoiding taxes, HMRC now has the legal right to demand that the amounts saved should be paid in full within 90 days. The new laws also include scope for payment notices to be issued retrospectively and can leave business with more tax to pay that they had anticipated.

Communication is key

Effective communication between all relevant stakeholders, company directors and their financial advisers can make a crucial difference in the context of dealing with unpaid and initially unaffordable HMRC debts. There are a range of potential funding options available that can help companies and their directors tackle these kind of issues but, without the right approach, these problems can very easily get much worse before they get better.

The key reason why communication is so crucial under these circumstances is that arrangements can be made to see your tax arrears settled but the terms are generally much more easily established when HMRC is fully informed of your position from the outset. Leaving an unpaid tax bill for any length of time can make these issues far more difficult to deal with when the point is reached at which they can no longer be ignored.

Getting the right guidance

Prior to introducing its new ‘direct recovery of debt’ laws, the government projected that as many as 10,000 companies around the UK were likely to be impacted. If you are concerned by your company’s position with regard to its tax liabilities or its relationship with HMRC then we at Begbies Traynor have the expertise to help. We provide expertise and specialist guidance to company directors looking for an effective and sustainable ways of dealing with debts owed to HMRC.

It is often the case that problems with paying HMRC can be the result of more underlying financial issues that ought to be addressed as a matter of urgency.

Call today to find out how Begbies Traynor might be able to help you and your company with financial or funding issues of any kind. We can arrange a free and confidential consultation at your convenience.

Network of Over 100 UK Offices

Find your local Begbies Traynor Group office and speak to an adviser today.

Find your Local Office
0800 063 9221

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0800 464 0871

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0161 837 1700

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
Begbies Traynor Group plc, announces that it has completed the acquisition of CVR Global LLP
CVR is a leading independent firm of insolvency practitioners, forensic accountants and experts in other related complementary disciplines.
Read More →
Coronavirus pushes financially distressed companies over the half-million mark
Number of businesses in significant distress stands at 509,000 – the highest number measured by the Red Flag Alert research
Read More →
BTG Advisory accelerates growth with appointment of four new partners to its London office
BTG Advisory, the boutique advisory arm of Begbies Traynor Group announces the appointment of four new partners to its Canary Wharf office
Read More →
Eighty jobs saved with £1m sale of engineering business
South Yorkshire company Newburgh Precision rescued through administration
Sale enables 75-year-old business to continue trading
Read More →
Join thousands of professionals by signing up for our updates
Analysis and Opinion from our Partners
Top Industry News
Register Now →

Advice you can trust

We are accredited by the following industry leading organisations

Insolvency Practitioners Association Institute of Chartered Accountants in England and Wales R3: Association of Business Recovery Professionals ICAEW Business Advice Service Turnaround Management Association ICAS | The Institute of Chartered Accountants of Scotland

Contact the Begbies Traynor Group team

or Find your Nearest Office

Here at Begbies Traynor Group we take your privacy seriously and will only use your personal information to contact you with regards to your enquiry. We will not use your information for marketing purposes. See PRIVACY POLICY


This site uses cookies to monitor site performance and provide a more responsive and personalised experience. You must agree to our use of certain cookies. For more information on how we use and manage cookies please read our PRIVACY POLICY