HMRC's Debt Collection Tactics

Following on from yesterday's article about HMRC increasing its spend on debt collection agencies, a joint investigation by The Independent and the campaign group False Economy has identified that hundreds of thousands of Britain’s poorest people are being targeted by private debt collectors hired by HMRC after their tax credits were overpaid.

Why were their tax credits overpaid?

Seemingly because of errors made by HMRC.

The debt collectors hired by HMRC phone the people they are targeting on their mobiles, send them text messages and write to them at home. Some of those targeted say they feel harassed and frightened.

In at least 80 tax credit cases, assets have been seized directly. This rather contradicts the message being promulgated by the HMRC spin masters that the agencies cannot seize assets.

In total, HMRC made 215,144 referrals to debt collection agencies in 2013-14 to “secure direct recovery of overpaid personal tax credits”.

Please feel free to share your experiences of HMRC's debt collection tactics.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



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HMRC Increases Its Spend On Bailiffs

UHY Hacker Young reports that HMRC has doubled its use of private sector bailiffs and debt collection agencies over the last two years, indicating that it is taking a more aggressive approach to recover overdue tax.

UHY Hacker Young says that HMRC spent £14.8M in 2013 on the use of private sector debt collectors, this is an increase of 15% from £12.9M in 2012 and more than double the £6M spent in 2011.

Mark Giddens, Head of Private Client Services at UHY Hacker Young, is quoted by Director of Finance:

“Bailiffs do not have the best of reputations and many taxpayers are going to be very alarmed when a debt collector is brought in.
 
Most taxpayers who are behind with their payments are in that situation because they simply can’t afford to pay their tax – not because they intend to string HMRC along.”

The risk of bailiffs being used is increasing as HMRC winds down its "Time to Pay" scheme.

Mr Giddens also notes:

“There is the danger of mistakes in communication between HMRC and its agencies, with taxpayers being incorrectly chased for debts. Any errors that do arise would be far easier to rectify if the process was kept in-house.”

HMRC uses 13 companies to aid it in its debt recovery programme.

However, the "success" or otherwise of farming out debt collection to the private sector depends very much on the quality of the private sector firm used and the validity of the information they are given to work with.

It is also worthwhile remembering that once you have unleashed the hounds, it is sometimes rather difficult to rein them back in. Do not forget that if HMRC are given powers to raid bank accounts, this may well exacerbate the problems faced by taxpayers incorrectly targetted as a result of erroneous HMRC data.

Please feel free to share your experiences of HMRC's debt collection tactics.


Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Low Hanging Fruit

A survey by Oxford University's Centre for Business Taxation has revealed that just over 25% of businesses feel it is harder to reach agreements with HMRC, due to strict adherence to internal guidelines.

The survey highlighted tensions between businesses and HMRC over internal guidelines for resolving arguments, aka the Litigation and Settlement Strategy (LSS).

Just over 25% of businesses said that, since 2007, it has been harder to settle disputes with HMRC.

Andrew McKenna, partner and head of tax investigations at Smith & Williamson, is of the view that the strategy seems to have hampered inspectors’ abilities to come to an agreement with businesses. He said there was also the possibility that larger businesses were handled by more experienced inspectors, which could affect the outcome.

Mr McKenna is quoted by economia:

“There does seem to be variation in how large and small businesses are treated. 

With smaller businesses, it could be down to the quality of the inspector, or it could just be the case itself.” 

The study also found that 36% of businesses believe the approach from HMRC has changed for the worse, with increased media exposure on the settlement process.

The media and political pressure on HMRC (from both PAC and others) has, according to some businesses, made HMRC less flexible.

The Treasury, unsurprisingly, deny this. As per a spokesperson:

“We adopt a level playing field in our dealings with customers and aim to resolve tax disputes through collaborative working, whatever their size. 

This is clearly laid out in the Litigation and Settlement Strategy, which all HMRC’s case workers follow.”

Given that larger companies have greater resources (time, personnel, money and legal expertise) I suspect that the "low hanging fruit" approach of squeezing SME's is very tempting to HMRC.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Record Breaking Tax Haul

The media are reporting that HMRC has raised a record £23.9BN in additional tax for the year to the end of March, as a result of a "crackdown on tax avoidance". 

HMRC state that the increased yield (almost £1BN higher that the Chancellor's target) is as a result of its investigations. Surely, if it has achieved this increase via investigations then not all of this relates to "avoidance" but must also relate to "evasion"?

Treasury minister David Gauke is quoted by the BBC:

"HMRC will pursue those seeking to avoid their responsibilities and will collect the taxes that are due.

The government is determined to tackle the minority that seek to avoid paying the taxes they owe."

Whilst the media and Gauke talk purely of "avoidance", HMRC note that £8BN came from large business, £1BN from criminals and £2.7BN from tackling avoidance schemes in courts.

Therefore part of this relates to evasion.

Anyhoo, that aside, HMRC has said it expects to secure £100BN between May 2010 and March 2015 as a result of its investigations into unpaid tax.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

49% of Automatic Late VAT Submission Fines Incorrect

It seems that HMRC is having a wee spot of bother wrt fining taxpayers for late VAT submissions, as in 2013 around 49% of appeals (8,000 cases) on automatic fines were successful.

UHY Hacker Young, which conducted the research into the incorrect fines, claimed that the computer based system used by HMRC was issuing fines for late submissions, regardless of circumstances.

Simon Newark, a partner at UHY Hacker Young, is quoted in economia noting that the onus on the taxpayer to prove his/her innocence does not go down well with the taxpayers:

“That’s perceived by taxpayers as being unfair, but unfortunately, that’s what the law says.

In a lot of borderline review cases HMRC is rubber-stamping the automatic penalty. 

Taxpayers should be allowed to explain their situation first before they are railroaded into a system of fines and penalties.”

However, HMRC is of the view that the system is “working well.”

An HMRC spokesperson said:

"Statutory penalties are sent out when a return or payment is late. Late receipt is a fact that triggers the penalty but of course we accept there can be valid reasons for being late and the taxpayer simply has to show they had a reasonable excuse for submitting late. 

If we accept the reason - and we do in 50% of cases - then there is no penalty to pay. 

This shows the system working well."

Wouldn't it save time and effort to check the reason for the late payment first, before automatically issuing fines?

Actually, no it wouldn't, because HMRC is aiming for maximum automation and minimum staffing levels.

Good luck to all if HMRC is allowed to raid bank accounts for unpaid tax!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Number of Tax Investigations Almost Double

The number of people being investigated by HMRC has almost doubled in one year, raising concerns that people who have made innocent mistakes are being targeted by the Government.

HMRC made inquiries about the tax affairs of 237,215 people last year, compared with about 119,000 in 2011-12, figures obtained by The Daily Telegraph show.

Aside from those taxpayers who deliberately seek to evade tax, there are those who make genuine errors on their tax declarations. The tax system being so complex it is hardly surprising that people don't understand what to do.

That aside, one commentator on the Telegraph site has put together a few numbers:

"The numbers were bugging me so I did a bit of research. I was interested to determine how much each investigator would need to find, to eliminate the £35 billion tax gap. it turned out to be over £22 million per investigator per annum:

Amount of Uncollected Taxes (Telegraph) £35,000,000,000 Number of Inquiries (2011-12) 237,215
Number of Tax Investigators: 1,600
Lin Homer (Chief Executive at HMRC) her figures:
Total Collected by HMRC £474,000,000,000
% not collected (Telegraph - £35 Billion) 7.38%
Total Individuals 45,000,000
Total Businesses 4,800,000
Number of HMRC employees 70,000
Tax Avoidance (14% of total tax gap (the difference between the total revenues that we collect and the total amount of tax that is theoretically due) which currently stands at £32 billion) £5,000,000,000
Calculate 'tax gap' from £5 Billion and 14% £35,714,285,714
Average per Investigator (tax gap/no. of Inv.) £22,321,429
Number of working days per year 223
Tax/day/inspector £100,096
Average per Inquiry £150,557
Number of Tax Transactions per Year (Karen Mason Table; 2010-11) 34,329,740"

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"