Thousands of small and medium-sized businesses in the UK could find themselves pursued by debt collectors following new HM Revenue & Customs mistake, according to the UK200Group, the leading association of independent accountancy and lawyer firms.

In a case highlighted by UK200Group member, an employer who pays PAYE and national insurance to HMRC on a quarterly basis instead of monthly was contacted by debt collectors a month before their latest quarterly payment of around £700, which is not due until 19 October.
Those that do not use an accountant will have to take time out from running their business to sort the problem out with HMRC

When the business approached HMRC on their client's behalf they were told that demands for unpaid PAYE and national insurance for PAYE in 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 £140m in tax, although HMRC said it would only refer a case to an agency after writing to the debtor.

"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," said Alan Boby, tax partner at UK200Group member Ellacotts LLP.

"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."