Can HMRC legally enforce debt collection?

Can HMRC legally enforce debt collection?

Didn't find your answer?

I realise there has been plenty of discussion regarding HMRC debt collectors bullying letters and what they can and can't legally do to collect debts, however I'd like to focus on the Self-Assessment payments on account due 31 January and 31 July. 

As these are really only 1st estimates of tax are they legally a debt that HMRC can start debt collection proceedings on if they aren't paid by the January and July due dates?

Thanks

Steve

Replies (12)

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By petersaxton
17th Jun 2011 12:34

Not estimates

They are not estimated they are exact based on the rules.

If you think they are overstated you can always get them reduced.

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By rcbarrettandco
17th Jun 2011 12:35

Claim to reduce

Obviously it is very simple to just make a claim to reduce payments on account (potentially to nil) and then the debt disappears until the following January when it will come back with a little interest (3% is a much better rate than the bank offer).  Has anyone ever had this approach attacked/penalised on the basis that HMRC consider you have deliberately underestimated what the payments on account should be?

But I'd still like to know if HMRC are acting illegally in trying to collect what is only an estimate of tax, not an agreed or assessed liabilty?

Thanks

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By rcbarrettandco
17th Jun 2011 12:39

apologies

Apologies, your Reply must have been posted whilst I was writing the next bit.

So the PoA are considered assessments until such time as you submit a tax return, then?

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By User deleted
17th Jun 2011 12:40

Why not?

Under the legislation the payments are due on those dates, so surely they can be pursued. I don't see that the basis on which the payments have been computed has much relevance. But in any event, they are not estimates - they are amounts computed in accordance with prescribed rules. (Amounts which can be reduced by the taxpayer)

[EDIT: crossed 'in the post'!]

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By User deleted
17th Jun 2011 12:46

Assessments

No, they are not assessments. But that doesn't mean that the debt can't be pursused - because both the due date for payment, and the basis of computing the amount, are set out in the legislation. Have a look at TMA 1970 s59A(7).

This contrasts with the treatment of quarterly instalments for large companies. In that case, the instalments are estimates and although the due dates for payment are set out, HMRC will not pursue payment (but then there is specific penalty provision for not paying instalments when they are due).

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By petersaxton
17th Jun 2011 12:49

Not effected by the next tax return

"So the PoA are considered assessments until such time as you submit a tax return, then?"

The tax return doesn't affect the payments on account. They still stand.What the tax return does is calculate the balancing payment and the next two payments on account.

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By rcbarrettandco
17th Jun 2011 12:56

Many thanks to Peter and BDK for putting me straight

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By rcbarrettandco
17th Jun 2011 13:08

to BKD section numbers

PS How do you find TMA section numbers so fast? Do you have an online info source (or are you just a taxes god!)

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By User deleted
17th Jun 2011 13:30

Tax IS my main area ...

... so I do know where to look - but anyone advising on Self Assessment ought to be familiar with s59A, 59B etc

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By petersaxton
17th Jun 2011 13:33

Plenty

Even if you don't specialise in tax there are a lot of paper and online services which provide references to the specific legislation.

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David Winch
By David Winch
17th Jun 2011 14:18

"Estimates"

I agree that the payments for the following tax year are not estimates.

In the Money Laundering & Crime Discussion Group we discussed the case of the unfortunate Mr Steed who defrauded HMRC out of £3,558 in respect of 2002/03 - and was ordered to pay £707,200 by a resulting confiscation order in the Crown Court.

The point about payments on account was highly relevant to that.

David

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Rebecca Benneyworth profile image
By Rebecca Benneyworth
19th Jun 2011 15:32

Reducing PoA's

There is a penalty where PoA's are reduced and then prove to be due - so I wouldn't recommend just filing SA 303 to reduce to nil as you could come unstuck with a penalty. I've not seen an appeal on this so I suspect it is not common, but I guess HMRC would look at why you reduced and on what evidence you based your estimate of tax ultimately due. I always resist clients' claims of low income until they bring the figures in. Experience tells me they often "forget" the good months at the start / end of the year! Been there, done that, but fortunately no penalty.

And don't forget that by July they have already had all of the income on which the tax is due - at the latest a 31 March year end should mean they can meet July's payment unless their income is down - in which case I normally file the return, not mess about with 303's at that point. (I know, ever the optimist that they keep back the tax...)

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