DMBM595080 - Pre-enforcement: Limits in enforcement proceedings: Limitation legislation

Limitation Act 1980

England and Wales

Debts that are not tax

In England and Wales only, the Limitation Act 1980 provides that recovery action for debts should commence within six years from the debt becoming payable. But Section 37(2) of the Act excludes proceedings for recovery of tax and interest, (and debts recoverable as if they were tax), and thus there is no time limit for those debts.

However, NIC and other debts that are not tax, for example settlements, are subject to the Limitation Act, and action must be taken within six years “from the date on which the cause of action accrued”. In this context the date on which the cause of action accrued is the original due date of the liability.

If an action is not taken within the time limit, it could be defended successfully on the grounds of limitation.

The date for limitation may be advanced by a number of means;

• payment made against the debt (where tax and NIC are being collected alongside each other, unless a debtor specifies otherwise, assume that any payment on account is made against both)
• acknowledgment of the debt – the acknowledgment must be both explicit and unequivocal. Contact P&S, Shipley if you have a case to which this might apply
• where the debtor has concealed any material facts in relation to the debt which prevented the creditor pursuing the debt from the date it should have been paid. Consult P&S, Shipley if you have a case to which this might apply.

Northern Ireland

Similar limitation provisions apply to the collection of National Insurance in Northern Ireland and references to the 1980 Act should be read in Northern Ireland as The Limitation (N. Ireland) Order 1989. Unlike “tax or duty or interest thereon,” Article 74(2) confirms that NICs are not excluded from the provisions of the Order.

Scotland

The Prescriptipn and Limitation (Scotland) Act 1973 applies in Scotland and provides for a time limit of 20 years for collection of debts.

However, debts that are not classed as tax, for example settlements, are subject to the standard rules of prescription (set out at schedule 1 of the 1973 act) which prescribes a time limit of 5 years after the last effective action.