HMRC DMU

Any experience of DMU taking clients health age into account when pursuing debt?

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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. 

Replies (18)

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chips_at_mattersey
By Les Howard
20th Mar 2018 11:05

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.

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By andy.partridge
20th Mar 2018 11:06

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.

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By lesley.barnes
20th Mar 2018 11:22

Thanks Andy - I only mentioned his health to give the full picture of what I'm dealing with. He will be able to get a written report from his doctor to support any case we put in if necessary.

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By Colinc
21st Mar 2018 10:24

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.

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Replying to Colinc:
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By johnjenkins
21st Mar 2018 10:28

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.

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By johnjenkins
21st Mar 2018 10:25

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.

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By lesley.barnes
21st Mar 2018 11:43

Thank you all for your help and advice. The client has already told me is already undergoing treatment for depression. He claims that a side effect of the medication is that he gets muddled up and forgets things. He is going to see his doctor today to start the ball rolling to get a report documenting his various health issues. He knows he's done wrong and has acknowledged this but he needs breathing space to sort his options out.

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Replying to lesley.barnes:
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By johnjenkins
21st Mar 2018 13:57

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.

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By johnjenkins
21st Mar 2018 14:00

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?

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By lesley.barnes
21st Mar 2018 14:31

Hi John,
I've already been down that route. We have tried to get the VAT back from the customer who is a very large company. We got the VAT certificate backdated and the customer asked for all invoices reissued including VAT. We had written agreement that the customer would pay the VAT. Someone higher in the organisation then refused to authorise the invoices. I had lengthy discussions with their accountant but they refused to budge. I've mitigated as much as I can on the CIS - the problem there is over half the CIS debt belongs to one person who has said he won't divulge his UTR and NI details and won't say if he has paid tax on the payments he received. There are a hardcore of other people that were brought into the project by "Mr I can't divulge" who are also saying nothing.

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Replying to lesley.barnes:
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By johnjenkins
21st Mar 2018 16:10

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.

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By RICHARDBIBBY
21st Mar 2018 18:10

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.

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By lesley.barnes
22nd Mar 2018 10:40

Thanks for your replies - the VAT certificate is backdated. I think from what you say about taking the other company to court for the VAT he might need to seek legal advice. I'm not sure whether he would have a leg to stand on because he was told the value of the work by the contracts manager but he's nothing to say whether it is including or excluding VAT. He wasn't VAT registered at the time so you could make an assumption that it didn't include VAT and the company hasn't already reclaimed it. The subbies were paid through the bank - HMRC have already had their names. addresses and any other details we had. They did find some of them and if they had declared the income they haven't been counted in the final amount. We've been given until the end of March by the officer dealing with the case to see if we can find out anymore about the ones they can't find. We have found one who was happy to supply his details and confirm he had paid his tax. We are left with a hardcore of subbies who appear to be known to each other that are keeping quiet. The more I've dug into this the more flawed the whole thing is. The client had done written reports for the contract manager who worked for the company so was known to him. The client didn't have a contract for the work. The contact manager controlled the price for the job, authorised the staged payments and brought in most of the workforce. The client paid the subbies and made all the purchases. The subbies kept asking for more money otherwise they would walk off. In the end the client pulled out of the contract because it was costing him more than he was receiving, he asked two subbies to leave because they were caught stealing. The project started to seriously over run. The contracts manager then finished the job and the client didn't receive his completion payment. The company should have deducted CIS from my client because they subcontracted the work to him but they didn't so there is a question mark over that. The contracts manager was then sacked by the company looking at the case I think I can guess why.

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Replying to lesley.barnes:
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By johnjenkins
22nd Mar 2018 12:17

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.

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By lesley.barnes
22nd Mar 2018 10:50

Hi Richard, yes the client is a sole trader. The house has a mortgage of £45k and is in joint names They have no other assets. The client believes the house is worth around £150k. Its because of all the legal matters that the client needs to deal with and for us to get a final figure for the debt that we need to slow the DMU down. He is also awaiting a referral regarding his mental health following a visit to his doctors yesterday.The doctor is going to provide a report in the meantime.

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Replying to lesley.barnes:
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By RICHARDBIBBY
22nd Mar 2018 13:41

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

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By lesley.barnes
22nd Mar 2018 13:32

Hi John, I've got the heart to fight it my problem is whether the client will be able to hold it together.

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Replying to lesley.barnes:
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By johnjenkins
22nd Mar 2018 14:37

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.

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