22 May 2015
Last summer we published an article in our tax update explaining the transition of the HMRC Managing Deliberate Defaulters regime into the Managing Serious Defaulters regime. The article posited that a change in the criteria which ‘qualified’ taxpayers for this additional HMRC scrutiny would lead to a significant increase of taxpayers being drawn into the scheme. However many of those would potentially be largely compliant persons or businesses who have simply been victim of HMRC’s over zealous approach to the charging of penalties for an inaccuracy, and have made a cost/benefit decision that it is cheaper to pay the penalty than contest it.
A recently published freedom of information request has revealed that our concerns were well founded, HMRC apparently having referred 30% more taxpayers to the scheme during 2014/15 than 2013/14, and 550% more than during 2012/13.
For a regime to be expected to monitor 6,051 taxpayers during 2014/15 with the same efficacy as it monitored 1,094 only two years previously there would need to have been a huge increase in resources made available to it. In these austere times this simply won’t have been the case, and it seems reasonable to conclude that the programme is now swamped with ‘small fish’ such that less attention is available to concentrate on those taxpayers deserving of the title ‘serious defaulter’.
Of course, that is not to say that the regime is toothless or that taxpayers should be complacent about being drawn in. Apart from the potential for HMRC visits and checks regarding your tax affairs, in certain cases being drawn into the regime could be coupled with having your details published on HMRC’s quarterly name and shame list of penalised taxpayers, which could do all sorts of damage to your reputation.
So our advice remains unchanged. If you find yourself in HMRC’s crosshairs it is essential to take suitable professional advice, not only to get the best possible outcome in the immediate term but also to be forewarned of potentially less visible threats like the MSD regime or the publication of details on HMRC’s name and shame list.
If you would like to discuss the details of this blog post further, please contact Graham Boar from our Letchworth office or a tax adviser at your nearest location. Alternatively, you can complete our online contact form.