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Newth Talks Tax: Is this HMRC up to its old tricks?

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3rd Feb 2009
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Stormrider disclosed his client's debt dispute with HMRC on 22 November 2007. His client owed a substantial amount of income tax for 2005/2006 and payments on account for 2006/2007, which he was struggling to pay. However, the amount was settled in full in October 2007 after an agreement was reached in July 2007 to pay HMRC in instalments from August to October 2007.

Despite the agreement made with HMRC a second surcharge was added to the 2005/2006 tax in July 2007. Was this correct? Are the Revenue permitted to continue surcharging even if an agreement to pay has been made? It was accepted that interest would continue to accrue.

Frances replied to this query, and stated that her firm had had several cases where surcharges were still being imposed after time to pay/instalment arrangements had been agreed.

The surcharges were cancelled when her firm had pointed out to the Service Office that Debt Management and Banking had agreed time to pay, and that it was not normal practice for HMRC to add surcharges once an agreement was in place. Could it be that there was a communication gap between the HMRC Service Office and Debt Management and Banking?

This query highlights the role that HMRC Debt Management and Banking undertakes in the tax process. It is sometimes considered that once HMRC had determined a tax liability, then nothing else could be done, in the absence of the filing of relevant information within time limits. Those who work for the charities TaxAid and The Low Incomes Tax Reform Group will know very well that this is not correct.

Often these charities and some practitioners are faced with a new client whose affairs have been in a real mess, who has not filed tax returns and who apparently owes HMRC an exorbitant sum. One procedure that has been publicised and is helpful is the concept of ‘equitable liability’ in such cases.

Of more relevance to the current case is the fact that, among the many Manuals that HMRC have published online, is the Debt Management and Banking Manual, which incorporates the Remission Manual and The Banking and Accountancy Guide. There is a wealth of information that will assist practitioners in this Manual. For instance remission of tax is dealt with between DMBM725000 and DMBM765000. Time to pay is covered between DMBM800010 and DMBM805000, and The Debt Arrangement Scheme between DMBM805010 and DMBM805070.

Tax practitioners with apparently intractable cases may well find help and assistance by studying the contents of the Debt Management and Banking Manual.

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