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Where Taxpayers and Advisers Meet

HMRC trying to collect tax from 17 years ago!

Red80
Posts: 4
Joined: Thu Jul 19, 2012 2:08 pm

HMRC trying to collect tax from 17 years ago!

Postby Red80 » Tue Aug 04, 2015 5:40 pm

Hi all,

I am trying to help out a friend's dad who has got into some bother with his tax. I have some background in tax and was able to offer initial advice and do his return but I have hit a brick wall now.

So his tax return was submitted for 13/14 and he was due a tax repayment of around £2.5k. He is a self employed joiner and had paid tax at source on his invoices. HMRC withheld the tax repayment and then sent him a bill for a further £2.5 (approx) which they are claiming he was due for the tax year 1997/1998.

It pans out that my friend's dad, was a UK resident and had been submitting tax returns up until 1997/98 when he split up with his wife and left the UK to go home to Southern Ireland where he stayed until 13/14. He says as far as he was aware all his tax was up to date when he left the country (he had an accountant dealing with his tax affairs), he strikes me as the responsible type of person and I honestly don't think he would have left without making sure his tax was up to date. I know this is irrelevant when dealing with HMRC though.

However, it wasnt. The liability for 1997/98 was yet to be paid and it still hasnt been paid but obviously on submitting last year's return it has flagged this up.

I contacted HMRC to request a copy of the details from this return and was initially told that they could not provide me details from this far back which I thought would go in our favour, however, after a bit of pressure I received print outs of the return. It turns out the accountant forgot to enter any tax paid for the year resulting in a liability whereas it should have been a repayment as he always received. Plus the accountant failed to enter the overlap relief since it was his last year, which despite the forgotten tax would have brought the liability to nil.

So now he is due around £5k of tax in total with interest etc, due to his accountants negligence. I have tried to argue with HMRC but they are not budging on the basis too much time has passed to change the returns. I also asked for an original return to be produced to confirm that my friend's dad had actually signed the 1997/98 return but they were unable to provide this.

I'm not sure where to go with this, does he just cut his losses and pay the other £2.5k or is there any other route of argument we can go down?

Any advice would be appreciated.

Thanks

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: HMRC trying to collect tax from 17 years ago!

Postby section 44 » Mon Aug 10, 2015 12:30 pm

I also asked for an original return to be produced to confirm that my friend's dad had actually signed the 1997/98 return but they were unable to provide this.
I don't see the significance of this.

Red80
Posts: 4
Joined: Thu Jul 19, 2012 2:08 pm

Re: HMRC trying to collect tax from 17 years ago!

Postby Red80 » Mon Aug 10, 2015 3:40 pm

He doesnt think he was in the country when the return was submitted so he was curious to see if he had actually signed the return.

Thanks,

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: HMRC trying to collect tax from 17 years ago!

Postby section 44 » Mon Aug 10, 2015 4:04 pm

... and if he hadn't signed it?

SteLacca
Posts: 448
Joined: Fri Aug 07, 2015 2:17 pm

Re: HMRC trying to collect tax from 17 years ago!

Postby SteLacca » Wed Aug 19, 2015 1:05 pm

If he hadn't signed it he has not made a self-assessment. In such circumstances, HMRC would have to make their own assessment. Since I'm assuming that they didn't, they would now be out of time to do so, and the tax cannot be held to be due. ironically, he could still submit a Tax Return which would not be out of date (http://www.tribunals.gov.uk/financeandt ... v-HMRC.pdf) and so secure his repayment.
Of course, if he has signed the Return then he is out of time to amend (the ruling only applies to the self-assessment, and not to amendments).

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: HMRC trying to collect tax from 17 years ago!

Postby section 44 » Wed Aug 19, 2015 1:55 pm

Since I'm assuming that they didn't, they would now be out of time to do so
what about discovery assessments and 20 years and all that?

SteLacca
Posts: 448
Joined: Fri Aug 07, 2015 2:17 pm

Re: HMRC trying to collect tax from 17 years ago!

Postby SteLacca » Wed Aug 19, 2015 4:12 pm

A discovery assessment would require them to come into possession that they did not have. Since a Return may have been submitted (albeit unsigned), then they were in possession of information to make an assessment in time. There can be no discovery where they had the information.

bd6759
Posts: 3347
Joined: Sat Feb 01, 2014 3:26 pm

Re: HMRC trying to collect tax from 17 years ago!

Postby bd6759 » Wed Aug 19, 2015 5:37 pm

The "discovery" is that there is income that has not been assessed. The "information available" clause applies to information provided with a return, which the OP is saying was not submitted. However, that clause would not even apply in these circumstances because to make an assessment the insufficiency would need to have been brought about deliberately. If that were the case then there is a right to assess regardless of "information available".

LozaACCS
Posts: 1504
Joined: Wed Aug 06, 2008 3:55 pm

Re: HMRC trying to collect tax from 17 years ago!

Postby LozaACCS » Wed Aug 19, 2015 8:46 pm

The 97/98 liability appears to be app 5K, you have not said whether it includes interest and penalties, I guess it would.
I cannot see that the discovery rules are in point since no undeclared income appears to have been discovered, it seems that HMRC have simply left a debt outstanding.
I think a Higgs type challenge would not be cost effective (and I am sick of arguing about it).
I personally would press HMRC to show what (if anything) they did about collecting the debt, your friends non residence status in the period may be relevant.
If they did nothing, then I would consider a claim to the tribunal on the basis that no effort was made to collect the debt and your friend was unaware of it, on that basis it should be set aside, the claim for overlap relief could not be made, I would also suspect that transitional overlap relief would have been in point.
If you supplied HMRC with details of the contractor concerned and the amounts deducted this could be a further mitigating factor, good luck

bd6759
Posts: 3347
Joined: Sat Feb 01, 2014 3:26 pm

Re: HMRC trying to collect tax from 17 years ago!

Postby bd6759 » Wed Aug 19, 2015 9:32 pm

I agree with Loza here.
I find it incredulous that IR then HMRC kept a £5k debt on their books for so long. You are probably unlucky. If it was a higher debt it would have had more priority and would have been written off when it was realised that the debtor cold not be traced. This low value debt has probably sat there because it was not worth them looking at it.
Unfortunately the Limitations Act does not apply to tax debts. Also, I am not sure about a Tribunal. A debt is a Court matter.


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