£4,800 not currently being pursued!

I picked up a client 18 months ago who was in a mess after having ignored her tax responsibilities

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I picked up a client 18 months ago who was in a mess after having ignored her tax responsibilities for many years.  Daily penalties had been charged over periods of time.  I put a lot of time into preparing the outstanding returns (rental income, employment earnings, self-employment and a fairly complex CGT transaction).  Eventually, I put 3 draft returns together and sent to the client for review together with an invoice as agreed.  Never received signed copies back but eventually received an email explaining that she was ever so grateful but due to a number of catastrophic personal issues, she was now out of work and wouldn't be able to pay me.

6 months later, noticing that the penalties were still increasing, I emailed her asking for an update and explaining the importance of getting returns in.  She again apologised, told me she was in huge debt, but, out of everybody, I was at the very top of her list of people to pay and that she was just awaiting a house sale going through.

12 months later, I get an email out of the blue - she has now found "employment" and will soon be in a position to pay me and thanking me for my patience blah blah blah.  This was 2-3 months ago and, yes you guessed it.... nothing since.

I was today going to remove her from my HMRC list and when logging on, I notices that, far from the usual enormous outstanding sums in penalties, the account is standing at zero.  For each of the years, for each penalty line item it says "not currently being pursued".

My very initial thought was that she might have submitted nil returns or even the returns I prepared, but I've checked the outstanding returns and nothing has been submitted.

I know the phrase is "not CURRENTLY being pursued", but I cannot for the life of me think why.  

Any ideas?  This person owes thousands in CGT and I'll be very miffed if she doesn't get pursued with this.

Replies (16)

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Jennifer Adams
By Jennifer Adams
20th Sep 2018 18:38

You could ring HMRC and find out? Also do a credit check on her. That would tell you a lot as in whether there are any court orders against her. It's a long time since the first penalties were charged and I would say that HMRC are not pursuing as they know they wont get their money.
About a year ago I had dealings with an ex-client who owed me money (I was waiting for a CIS refund which never came as HMRC kept it). Client then spoke to a man down the pub who told him that he should put company into liquidation and that would get him out of paying. So he did with just HMRC and me as creditors. The liquidator said that he dealt with many such cases and invariably HMRC wont take further action if collection is less than £10K. He said it wasnt worth the legal fees in doing so
Liquidator wouldnt do anything about my money so I sued the director personally. He has nearly paid off the debt his company owed me - HMRC got nothing.
I'd ring HMRC and find out but dont say too much - just say you were going through your list of clients to delete as this person is no longer client, saw the words and ask why.
If after you have done a credit check you see that she has orders against her then put the case down to experience. If not then sue.

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Replying to Jennifer Adams:
ALISK
By atleastisoundknowledgable...
21st Sep 2018 07:33

Hi Jennifer,

What wording do you have in your LoE that binds the director?

Thanks

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By Manchester_man
20th Sep 2018 19:15

Thanks Jennifer. Glad to see that you got your money eventually - I assume you had a line in your engagement letter extending liability to the director.

Can you recommend any services I can use to do a credit check? Not only for this client, it would be useful generally.

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Replying to Manchester_man:
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By Livepay
21st Sep 2018 09:03

You cannot legally do a credit check on an individual without their permission.

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By Colinc
20th Sep 2018 19:46

We saw this on corporation tax
£20 from a short period in first year
Not due so pursuing was not relevant I guess
But the 365 day period debt was listed as payable
Both of the sums had a CT payment reference to quote
Colin

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By SteveHa
20th Sep 2018 20:23

Don't be fooled by "Not currently being pursued". Picked up a client last year with historic debts of several 000s, not being pursued. brought later returns up to date, and the earlier debts are live again.

Client is making payments on a plan for the historic, but then you have a lot of maintenance. Because HMRC allocate payments against the earliest debts first, late payment penalties kick in on the later ones, despite them being paid.

It's a constant chase to have payments intended for the latest debts allocated to those later debts, since the earlier payment plan has stopped penalties on the historic.

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By Matrix
21st Sep 2018 06:50

If there are significant liabilities which have not been declared to HMRC then you will need to submit a SAR if you have not done so already.

It looks like a lot of time has passed but why don't you resend your invoice anyway since she is the one who got back in touch. I doubt she would know that HMRC aren't currently pursuing.

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By lesley.barnes
21st Sep 2018 09:43

Could this client have declared bankruptcy or been taken to court by someone and been made bankrupt? I picked up a client some time ago and when I got access to his self assessment his £10k self assessment debt had been moved to not currently being pursued.

I rang the agent helpline and was told that the clients name had been on a list of bankruptcies from his local court. They had just issued a new UTR number for him but the client had given me the wrong number and oh just forgotten to mention his previous bankruptcy.

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Jennifer Adams
By Jennifer Adams
21st Sep 2018 15:52

Its not in my LoE - its in the Insolvency Act
s 213/214 or s 246 (z) IAA 1986 (inserted by s117 SBEEA 2015) so obviously is only relevant if a company goes into liquidation.
I wrote about the legalities in an article published on Accweb last year:
Get it right: buying the right to recover outstanding debts
https://www.accountingweb.co.uk/practice/general-practice/get-the-detail...
But that is for a company. I have also sued an individual through the county court and won and they hadnt petitioned for bancruptcy.
>> and yes... you now have to actually ask the client whether its OK to do a credit check.
You could always ask DCBI Ltd - those people you see on 'Dont pay we'll take it away' to go round.

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Replying to Jennifer Adams:
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By ShayaG
26th Sep 2018 17:57

Very interesting. I had always understood that wrongful trading was a criminal offence entirely unrelated to any civil liability that the directors may have had entirely?

So their personal liability to you would arise out of tort of having run their company negligently?

Did you pursue this in a normal small claims court? Was either side legally represented?

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By Ben Alligin
24th Sep 2018 10:26

I think it means HMRC cannot be bothered to chase, but if HMRC staff do nothing it flags on a performance report, so by entering 'Not currently being pursued' it disappears. Hearty backslaps, chocolate biscuits with their morning coffee and hopefully no-one will notice at the relevant HMRC office!
I have a client who was made bankrupt a few years ago, they disappeared literally for years and then decided to gets their tax affairs in order. HMRC were so surprised that even when we filed the missing tax returns they refused to accept them. Despite that, I advised the client to pay what was due. HMRC then tried to refund the credit on their account to the client. A couple of months later another letter arrived advising us that we had failed to filed for earlier years and this was a heinous crime and we should rectify the matter forthwith.
Another 'phone call to the idiots to tell them that we had already filed them, they had refused to accept them and also wanted to return the tax paid. So they had all the information and tax returns in their possession perhaps they could just have a proper look at the clients file.
They have finally agreed to accept most of the filed returns but not one particular year. They have now matched the large credit on account with the relevant tax years, but interestingly ignored the 'Currently not being pursued' penalties, which they eliminated by means of a credit to the tax overview.
I have given up wondering what they are up to. If my client is not charged these valid penalties due to the ineptitude of HMRC we have opted to just accept it.

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By ashmehta
24th Sep 2018 11:23

We have the following in our terms of business:

In the case of incorporated businesses, the directors* guarantee to pay personally any fees (including disbursements) for services provided to the company that the company is unable to pay. This clause shall become effective in the event of a receiver or liquidator being appointed to the company or the company otherwise being wound-up.

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Jennifer Adams
By Jennifer Adams
28th Sep 2018 09:27

In response to ShayaG's comment - as I said...have a look at the article I gave the link for. It confirms my experiences and what can be done. I did it with the full guidance and acceptance of the liquidator dealing with the company.
https://www.accountingweb.co.uk/practice/general-practice/get-the-detail...
Also... a separate article of mine written after my experience in taking a client to the small claims court.
The SMC one was a different client from the company that placed itself into liquidation.

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Replying to Jennifer Adams:
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By ShayaG
04th Oct 2018 15:11

I still don't understand why the criminal offence of wrongful trading has any relevance in a small claims court or gives rise to any liability. I'm very sceptical that you had any case in law.

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Replying to ShayaG:
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By ShayaG
04th Oct 2018 15:12

Or you bought the "right to action" from the liquidator?

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By mrshamilton
01st Oct 2018 08:20

We have had 'not currently being pursued' on a client that has taken out a IVA, I rang HMRC and they just said that these years were subject to the IVA and they will not collect the debt but will collect future years onwards.

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