By Claire West
Thousands of small businesses up and down the country could find themselves pursued by debt collectors following a new HM Revenue & Customs slip-up, says the UK200Group, the leading association of independent accountancy and lawyer firms.
In a case highlighted by Alan Boby, tax partner at Banbury-based UK200Group member Ellacotts LLP, an employer who pays PAYE and national insurance to HM Revenue & Customs (HMRC) on a quarterly basis instead of monthly — a legal relaxation for small businesses whose payments fall below a threshold of £1,500 per month — was contacted by debt collectors a month before their latest quarterly payment of around £700, which is not due until 19 October.
When Ellacotts approached HMRC on their client’s behalf, they were told that demands for unpaid PAYE and national insurance for PAYE months four and five — July and August — had gone out and the client had been wrongly caught up in the trawl.
It was announced in July that HMRC would start to use debt collection agencies in 2010-2011 in a bid to collect an extra £140 million in tax, although HMRC said it would only refer a case to an agency after writing to the debtor. However, Alan Boby said that businesses on quarterly arrangements would be advised that a demand for a monthly payment did not apply to them.
He said: “This is not a light touch from HMRC — it is only a step away from sending in the bailiffs. I suspect that this is due to a computer error, in which the system has spewed out a mass of debts due because it has not been programmed to take into account of quarterly payment arrangements.
“This is very unfairly victimising small business owners and managers. Those that do not use an accountant will have to take time out from running their business to sort the problem out with HMRC and those that do will be paying their accountancy firm to put right an HMRC error.”