DMBM515070 - Debt and return pursuit: Self Assessment: debt and return background: enforcement action
The majority of this manual will be archived on 30 Apr 2024. If there is content within this manual you use regularly, email hmrcmanualsteam@hmrc.gov.uk to let us know.
Initial recovery action
From 3 January 2006 the majority of outstanding debt and / or return work items were cutover into the Integrated Debt Management System (IDMS).
IDMS sorts these work items and sends these to either
- DMB campaigns
- The appropriate Debt Technical Office
- Specialist teams within DMB, for example ICHU and national Non Residents Unit.
Initial pursuit of outstanding SA debts will be taken in accordance with the information provided in the section 'Debt and return pursuit: Co-ordination’.
Where the issue of automatic IDMS letters or DMTC activity is not successful the work item(s) will be reviewed prior to passing the case for enforcement action.
Enforcement action
The Enforcement Case signal will be automatically set by IDMS when the associated Next Action note is requested on IDMS, such as where enforcement action is being taken, for example distraint action or county court proceedings.
The Enforcement Case signal can be shown on cases working with the DTO and cases working with the Enforcement and Insolvency Services (EIS) and brings attention to the fact that the case is at the enforcement stage of collection.
The enforcement signal does not mean that the case is working with EIS and you will need to check who has collection responsibility to identify if the case is working with a DTO or EIS.
In certain circumstances referral of the case to EIS may be necessary, see section Enforcement Action: Transfers to Enforcement and Insolvency Services (EIS).
Actions to take prior and during enforcement action
To determine the type of enforcement proceedings to take, and for detailed information on how to conduct the various methods of enforcement, see section Enforcement Action.
Before starting enforcement proceedings you must ensure a demand for payment has been issued to the taxpayer. If an IDMS warning letter has not already been issued to the taxpayer, issue the appropriate IDMS letter. IDMS will automatically note ‘Action History’ that where an automatic IDMS letter has been issued. For clerically issued IDMS letters, you will need to update IDMS ‘Action History’ manually.
Actions to take
- check IDMS Action History, Notes/Assets and Signals for any relevant information
- consider any information obtained during initial pursuit of the debt
- set the ‘No Repayment’ signal via SA if it is not already present
- make an Action History note on IDMS detailing actions taken or any relevant information
- carry out a recovery proceedings (RP) check on the date of proceedings and at all subsequent stages of enforcement.
Payment allocation in enforcement cases
The SA system automatically allocates payments to liabilities in strict chronological order. For further information see ‘Payments’ section.
This may cause problems in some proceedings cases. For example where proceedings are taken to recover the first payment on account and accrued interest but payment is made after the second payment on account becomes due. The actual interest charge is not created until after payment for the underlying debt has been made that is later than the second payment on account. SA would automatically allocate money to the (earlier) second payment on account before the interest charge on the first.
You should allocate payments as per the debts claimed in the proceedings. If you do not you may prejudice further proceedings.
To ensure the correct allocation, follow the procedures in the section ‘Payments'.
Interest
Interest accrues on all SA liabilities (except interest itself) until the debt is cleared. Interest does not stop accruing at the date of commencement of enforcement action. The old principle of stopping interest at the date of proceedings no longer applies. You should ensure that accruing interest is included in your recovery actions.
Calculating interest
When a case is prepared for enforcement action on IDMS, IDMS will automatically call function INTEREST CALCULATOR to calculate interest where appropriate.
To calculate interest for a work item on IDMS where the INTEREST CALCULATOR is not automatically called, use IDMS function INTEREST CALCULATOR.
If you need to calculate interest for future debts (where there is not yet a work item on IDMS) use the IRIS function SAIN to calculate interest.
Taxpayer statements
Taxpayer statements will continue to be issued by the SA computer system after proceedings have commenced. The statements will show interest accrued to date until payment in full is received.
Claims to adjust payments on account
Taxpayers may make a claim to adjust the payment on account at any time up to 31 January following the end of the tax year. You will find further information on this subject in the Self Assessment Manual, ’Amend Payments on Account’.
The due date of the adjusted amount is not affected and collection activity should continue without interruption.
Note: Where a claim to reduce is shown to be excessive following the processing of a return the payments on account are reinstated. The due date for this reinstated element is the same as that for the balancing charge, that is generally 31 January following the year of the return, but interest accrues from the original relevant dates and these items will appear on your IDMS work lists.
Where there is an increase to an existing work item you must check the origin of the increase on SA. You can identify reinstated payments on account by an amendment to the claim to reduce.
Costs
Costs are not accounted for in SA. You will need to create an IDMS work item for any law costs.
For further information on IDMS
For more details about IDMS and how to access any of the IDMS functions please refer to the IDMS site on the Intranet or the IDMS User Guide.