The government is considering granting HMRC new powers to recover unpaid tax directly from digital wallets.
The proposal is one of a number of measures that are being considered as part of plans to modernise tax debt collection from non-paying businesses.
While the overwhelming majority of people and businesses in the UK pay their tax on time, the latest figures from HMRC show that there is around £48bn in tax owed to HMRC but remaining unpaid. According to HMRC, the vast majority of this tax debt is owed by small and medium sized businesses.
Part of the challenge facing HMRC is the recent growth in e-commerce models which makes it harder to collect taxes from businesses that don’t conduct their business in the UK or don’t have a presence or physical assets here. The enforcement officer or bailiff turning up ‘on the doorstep’ is not an option for many virtual offices or digital only businesses.
The government intends to focus an initial consultation on the following 4 proposals:
- extending Taking Control of Goods powers to those with no UK assets or no assets at a principal place of business, so that HMRC can seize assets at other premises where their trade is not conducted such as third party warehouses.
- extending Taking Control of Goods powers to in-house leasing
- extending Direct Recovery of Debt powers to include Digital Wallets
- security deposits from businesses who are repeatedly, intentionally non-paying
As part of their work, HMRC will also seek to understand the true scale of the problem of serial non-payers.
Dawn Register, head of Tax Dispute Resolution at BDO, said: “While HMRC seeks to help taxpayers who are struggling financially by offering Time to Pay arrangements, new tax debt is running 50% higher than pre-pandemic levels and needs to be reduced.
“It is clear that the Government believes the tax authority needs further powers to tackle the hardcore of non-paying businesses that aren’t playing by the rules and who put up taxes for the rest of us. However, the practical challenges of using any new powers will be the real test for HMRC, including digital businesses located offshore.”
