I've been working on a case for a client which involves a failure to register for VAT and a failure to deduct CIS. This arises from the only project that he undertook in 2015/16, this resulted in a loss of £3k. The case is almost but finished with significant monies owed to HMRC by the client. I've done all the usual things to mitigate the debt were it was possible. The debt owed to HMRC is in the region of £50k. The case isn't settled yet as still have a couple of matters outstanding but the DMU are already chasing. I've already advised the client he needs to speak to a debt management charity because when we did his income and expenditure he was just keeping afloat.
The crux of the matter is the client is 70 - he has a state pension and a small private pension of £600 a year. He cares for his disabled wife who receives disability benefits. They've no other income or savings. The house has a £45k mortgage on it, they have the usual household bills. The client is unwell he suffers from asthma, COPD and since September has been taking anti depressants. I often have to go over the same things with him several times and even when I put things in writing he still forgets or gets muddled. I'm not sure if its the anti depressants or something more serious. The DMU have suggested that as he has no way of paying the debt he uses his only asset which is his house either selling it or drawing down the equity. They have threatened court action will be the next step if he doesn't come up with the money. He believes his house is worth £150k and it is jointly owned with his wife, until its valued we won't know.
My question is has anyone any experience of getting the DMU to back off in these circumstances and give the client time to take advise on his position from someone who specialises in debt management. Given that yesterday was the first time they have spoken to me it seems harsh to be talking about court action. He needs to get his house valued and all this assumes that his wife will agree to a sale or a draw down. I don't want him to be pushed by the DMU into making the wrong decision or into the arms of an unscruplous equity release company.
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The DMU have an Extra Support team, who may be able to assist. I have found them to more supportive than the usual DMU staff.
I can not imagine DMU taking your word for your client's health and how that might influence proceedings. If you want to bring this in I would expect you might need an independent health professional on your side.
I have a similar case, the sums are less and the client is younger but he has no house and minimal assets
Basically he is too close to retirement age to borrow the sums which HMRC need and could never repay any loan.
The DMU acknowledged this. They keep threatening bankruptcy but will not either close or negotiate the case. This has been ongoing for over 1 year.
The reason they won't do anything is because, at present, there are no assets but they won't write it off. If your client won the lottery they would then take further action.
You certainly need an independent health report which should include a psychiatric analysis. It certainly sounds as if your client is getting depressed which could endanger his health more.
If his wife doesn't want to sell, HMRC would have to take them to court and I doubt very much if the court would agree. So I would think, once the debt is proved,HMRC have to go to court so that they can obtain judgement, they would take a charge on the property.
There's a team called the "last resort team" which are a lot more helpful.
So a letter to HMRC saying that your client is undergoing treatment for depression (you have to actually get him to start the process) should give him the time so that reports can be obtained.
I have been through the ombudsman and Parliament with another case but the health scenario (genuine) was the only way to stop them.
Because of the asset, HMRC are unlikely to write the debt off.
If it is a genuine debt (not just an assessment through incorrect records) then once you have the doctors report suggest to HMRC that your client would be willing to allow them to take a charge on his share of the property. This should stop any more chasing.
A couple of things spring to mind. Is it possible to get some if not all of the VAT back?
Although CIS tax might not have been deducted, if the workers tax has been sorted then that should be mitigated.
Or have you already gone down that route?
Hi Lesley,
As the VAT certificate is backdated and no doubt the "customer" is VAT registered then the company has to pay the VAT over. So take them to court (this will also show that you are doing something to try and get HMRC's money).
Were the payments to Subbies cash or through the bank? HMRC should be able to trace them if you have names and addresses, mobile numbers etc.
I'm not sure of your tax experience but I would certainly get an experts appraisal (normally free) of the scenario as I feel there is a case.
Perhaps a little hint to HMRC that you think there might not be a liability may stop them chasing. I presume a figure hasn't been agreed with HMRC.
Presumably just the husband in business as a sole trader? If so is the house in joint names as suggested? If yes HMRC can't easily force the collection of the debt. The Wife may need to take some legal advice. I think a judge would be reluctant to force an eviction but more facts needed.
The contract amount has nothing to do with VAT. Really it shouldn't matter to the "customer" as they are VAT registered. A county court summons (if below the level) should focus their minds and I believe they would pay up without actually going to court, because they don't have a leg to stand on. If the VAT certificate wasn't backdated then perhaps it might be different.
Basically Lesley, if you and your client have the heart then you could fight this case until HMRC would "do a deal". The reason why they are chasing now is because they realise that the debt could get lower.
As far as the subbies are concerned, perhaps the "customer" who sacked the contracts manager could have some details. If all payments were made through the bank then a letter to the subbies via their bank (to be forwarded) stating that unless they give you all their details you will give HMRC their bank details and suggest that undeclared income might have gone through their bank.
There are a lot of positives to negotiate a settlement.
Hi Lesley
I think that you need to be hard with HMRC but constructive. The equity in the house is 105K less realisation costs £5K leaves £100K tops so Husband's share is £50K, HMRC want more than that and if your clients sell they will have to fall on the state - a bad idea for the taxpayer. Help your client with an income and expenditure account and statement of assets and make an offer of something to HMRC to last the life of both of them. If HMRC don't agree they will have to make the Husband bankrupt and throwing them on the street won't look good when they go to court to seek eviction. A Judge might take the view that they have been hard done by and it would be unconscionable to evict the Wife in the circumstances. In addition to this the costs of bankruptcy will reduce the value of the Husbands assets even further.
A few years ago a client of mine ended up with a large unexpected tax bill and HMRC did a deal which meant he kept the house as they took sympathy on his position at the time. They settled on a small sum per month but the debt remains. Keep repeating the message to HMRC every time you contact them and put them into a position of having to justify eviction of an old couple - this may concentrate their minds.
Richard
Then you have to fight for both of you. Try to give your client the confidence that you and he must exhaust all avenues, then the lanes and I'm sure, once the depression tablets start kicking in (normally 3 to 4 weeks) he will get stronger and be able to cope.
It's going to take a bit more of your time that you probably won't be able to recoup but offset that against the experience you will gain - priceless.