Pre-enforcement: limits in enforcement proceedings: limitation legislation
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 or duty and interest on tax or duty thus there is no time limit for those debts.
Other debts that are not tax, for example
- contract settlements
- tax credit overpayments
- Child benefit overpayments
- National Insurance Contributions
- Statutory payment recoveries (Statutory Sick Pay, Statutory Maternity Pay, Statutory Paternity Pay and Statutory Adoption Pay)
- overpaid Child Trust Fund contributions
- Student Loan repayments and
- National Minimum Wage Act penalties
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 an action is the lodging of a complaint in the magistrates’ court, the issue of a county court claim form or the levying of distraint. In this same 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
- 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.
Similar limitation provisions apply to the collection of National Insurance in Northern Ireland and references to the Limitation Act 1980 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.
The Prescription and Limitation (Scotland) Act 1973 applies in Scotland and provides for a time limit of 20 years for collection of debts, including National Insurance Contributions.
However, certain debts (for example, settlements) are subject to the standard rules of prescription (set out at schedule 1 to the 1973 Act) which prescribes a time limit of five years after the last effective action.
The time limit is interrupted by a ‘relevant claim’ or where the debt has been ‘relevantly acknowledged’. This means that HMRC must commence legal action to recover the debt within 20 years (or five years for certain debts) or that the person who owes the debt must have acknowledged it is due by, for example, making a payment to account.