Tax farming: Debt collection agencies explained

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The law relating to debt collection agencies is straightforward: An agent must be able to provide a copy of instructions from the principal debtor, instructing the agency to collect the debt, and stating the amount of the debt collectable, explains David Gordon.

It is not sufficient to provide a letter on the agency’s notepaper, saying “We have been instructed…” I repeat, upon request of the debtor or his agent, the agency must produce a copy of clear instruction from the principal. Further the principal must have advised the debtor that it was placing the debt in the hands of a debt collector, naming the debt collector.

No “ifs” no “buts”, proof of entitlement to collect must be available, and be produced if asked for.

To attempt to collect and or extract money from a third party, (that is, the person purports to be agent collecting for the debtor, the party to whom the funds are due) except and unless the collector is able to produce formal proof of instruction, is an unlawful action.

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By elansea
18th Mar 2013 16:58

Debt Collection

Whilst I approve of HMRC collecting what is rightly due to them, I do feel that they try to bully the small guy while the big guys get away with fortunes. If the advice from Mr Lovell levels the playing field just a little, then it shouldn't be ignored.

I am always amazed at how much VAT and PAYE is owed by football clubs and major liquidations/CVAs etc. It seems like more than one quarter's VAT or month's PAYE. I guess their bullies are too busy with the pond life to chase the big fish.

Great article, and you can rest assured that the institutes won't upset their cosy tea parties by pressing the matter with HMRC

Thanks (1)
18th Mar 2013 17:43

Minor editorial clarification

Thanks for your kind comments. However the main thrust of the article is entirely David Gordon's. Robert Lovell (AccountingWEB's deputy editor) added the comments drawn from previous members' conversations to support and illustrate David's argument.

Thanks (0)
19th Mar 2013 19:07

They tell lies

A client had one of these debt recovery firm "collectors" on his doorstep. The collector claimed he was from HMRC and that he had the right to force an entry into the house and strip it bare if he wasn't' paid in full immediately. Luckily the client was smart enough to slam the door in his face and call the police.

Thanks (1)