HMRC and the direct collection of debts

23 December 2015

23 December 2015 by Nigel May Tax

The Government’s announcement in the post-election summer budget that it was still going to allow HMRC to collect directly tax from taxpayers’ UK bank accounts would have worried many professional tax advisers, despite its assurances that safeguards would be put in place to protect the vulnerable.

This week the HMRC published new guidance regarding how it envisages dealing with vulnerable customers. The guidance sets out four indicators of vulnerability:

  • A disability or long term health condition
  • A temporary illness, physical or mental health condition
  • Personal issues such as bereavement, redundancy etc.
  • Low levels of literacy, numeracy and education

The protection given to individuals who fall into these categories is that “HMRC must take those matters into account in deciding whether or not to exercise the power concerned in relation to the person.”

My worry is that scant protection has been given to vulnerable taxpayers, particularly as we are provided with no information on how HMRC will act once vulnerability has been established. 

Regrettably, HMRC’s previous behaviour provides precious little comfort. HMRC states that it “routinely take a sympathetic approach.”  However, looking to the Adjudicator’s Office and recent Tax Tribunal cases, the opposite picture emerges:

  • 2311 referred cases were considered by the Adjudicator’s office in 2014/15 of which 2073 cases were found wholly or partly for the taxpayer.
  • A case where it was acknowledged that the taxpayer had problems with reading, writing and spelling, and the intellectual capability of a primary school child, yet was not given any leeway by HMRC, the tribunal finding that HMRC behaviour was unconscionable.
  • An individual with dyslexia, Asperger’s syndrome, other mental health issues and a walking disability was charged penalties with apparent disregard to those conditions.
  • In another case, the tribunal found an internal HMRC review of a decision made to have been “fairly perfunctory”.

HMRC has been challenged on numerous occasions regarding its exercise of administrative powers and has been found on too many occasions to have failed what is termed the Wednesbury unreasonableness test: it has not paid due regard to matters that are relevant and has taken into account matters that are not relevant.

Unfortunately, the caseload of Tribunal and the Adjudicator’s office is likely to represent only the tip of the iceberg. 

I believe that the Office deals with only a fraction of equally relevant of cases because relatively few individual tax payers have the time, energy, financial resources and wherewithal to take on the monolithic HMRC. 

When it’s a vulnerable person challenging the HMRC, it’s likely that this situation will be compounded, and I fear that under direct collection, the promised legal protection will surely be inadequate.

At this time of year, this new legislation provides an unwelcome Christmas present for Members of Parliament: bulging sacksful of complaints from constituents disgruntled and angry as result of HMRC’s behaviour. 

For further information, please contact Nigel May or your local MHA MacIntyre Hudson tax advisor.