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Equitable liability to go

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1st Jun 2009
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HMRC announced in the Budget that the practice in relation to equitable liability as described in a Tax Bulletin article dated August 1995 would be abolished. The website now carries a news item indicating that the concession will be abolished on 1 April 2010.

The original article explained the circumstances in which information received after the statutory deadlines had passed might be accepted as evidence that finalised tax liabilities were too high and a decision taken not to pursue recovery of the full amount assessed.

This concession was originally introduced to protect other creditors when the Inland Revenue's claims in insolvency cases took precedence over the claims of other creditors. Where recovery proceedings concluded with the insolvency of the taxpayer, assessments based on estimated amounts that had not been appealed could sometimes result in unfairness, and the Crown preference meant that third party creditors could lose out to an unjustifiable preferential tax debt. The use of the concession was also applied in non insolvency cases where it was considered appropriate.

As a result of the withdrawal of Crown preference in 2003, together with the requirement for HMRC to review all concessions in the light of the Wilkinson judgement, HMRC has now decided that the concession is beyond their powers and will be withdrawn from 1 April 2010.

The news item states that there may be a small number of exceptional cases where HMRC can accept that there was a ‘reasonable excuse’ for not making the return or for not displacing the determination within the statutory time limits. In such cases HMRC will accept the late information and adjust the liability accordingly.

The news item does invite comment from affected parties.

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Replies (4)

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By User deleted
03rd Jun 2009 14:24

Leave it be
I agree. This Firm has only had cause once in 30 years to revert to Equitable Liability, but it would have been a travesty had that ultimate safeguard not been available.
This appears to me to be an ultimate safeguard to be able to put things right, when otherwise a strict interpretation of legislation would have brought an unintended and unreasonable result. Leave it there.

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By AnonymousUser
03rd Jun 2009 12:14

equitable ?
HMRC does argue that the introduction of self assessment changed the rules here (in that you will not have the same problem of unappaled estimated assessments) but it seems to me that TaxAid are the people with experience here and need to be listened to.

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By User deleted
01st Jun 2009 16:24

What fairness?
John Newth is quite right and once again HMRC is hitting the weakest members of the taxpaying society, or more likely those who should not be taxpayers. I used this 'concession' many years ago, when it was an unpublicised way of obtaining fairness in what is often an unfair regime, and it needs to be preserved.

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By Sherlock
01st Jun 2009 13:45

Invalid reasons
HMRC have stated invalid reasons for withdrawing the concession of Equitable Liability, and I have made my protest to their representative.

The decision will hit hardest those taxpayers who can least defend themselves, and cannot afford expensive professional fees. Bodies such as TaxAid and the LITRG, in their valuable work, will be badly affected. More to the point, taxpayers not able to take advantage of the Concession will be made bankrupt. lose their homes and suffer other financial indignities.

Years ago when I was in practice, I took on such a case pro bono. The taxpayer had already been to the Commissioners twice and had failed. We managed to invoke equitable iiability, and the taxpayer paid 'the correct amount of tax' in the end. Now where have I heard that phrase before?

The HMRC decision heralds yet another step toward a much harsher regime. No wonder the concept of a so-called Taxpayers Charter is undergoing so much debate!

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