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The Provincial Tax Practitioner recalls a recent problem with PAYE demand letters from HMRC.

Introduction - Threatening Letter from HM Revenue & Customs

A client rang us to say he had just received a nasty letter from HMRC requesting payment of 2010/11 overdue PAYE. He naturally wanted to know why he was paying us his hard-earned money for failing to ensure that he complied with his PAYE obligations. After all he was quite capable of doing that himself for free.

How much were HMRC demanding in their rather threatening letter?

He hadn’t a clue; the letter didn’t say. Surely we’d know?

Actually we didn’t have the faintest idea either. As far as we were aware he owed nothing: because he had no employees.

Didn’t we get a copy of the letter?

We couldn’t bring ourselves to tell him that we stood more chance of getting dengue fever.

So we asked him to bring in the unpleasant missive, and after a quick read through, we came to the considered conclusion that it was only really suitable for wrapping fish.   

What Did the Letter Say?

First sentence: You have not responded to our previous attempts….

Perfectly true. But then in our lack-of-response department this was small potatoes. In the general sense of the word, neither we nor the client have responded to a multitude of attempts, previous or otherwise. For example, attempts  to break the world boiled egg eating record, attempts to walk across the Channel on tea trays, and Wayne Rooney’s attempt to win the title of the World’s most intelligent and refined footballer.

…to collect the debt.

To illicit a response to any attempt, it is first necessary to be fully aware of what the ‘attemptor’ is trying to do, and why he or she is trying to do it. In the case of HMRC we hadn’t got an inkling because

1. the debt wasn’t quantified and
2. as far as we and the client were concerned, HMRC hadn’t made any attempts previous to the one they were now so ruthlessly making in this particular letter.

Second sentence of the letter: you must therefore pay the full amount immediately or… ...we will take distraint action.

Tricky one; not knowing what the amount was, either full or half full. Rather than take distraint action, it would have been more sensible of HMRC to make their action one of restraint: at least until they had got their act together.

Third and fourth sentences: Distraint involves removing your goods and selling them… ...may not clear your debt… ...further legal action… ...additional costs.

A web address was then given, which you could visit for a more detailed elaboration on distraint procedures. This is a bit like being threatened with a kick in the nether regions by a horse ...and then accepting an invitation to visit a web address that graphically shows exactly what it’s like to be kicked in the nether regions by a horse.

By the time we reached the third and fourth sentences we sent a member of staff out to buy some fish.

Contacting HM Revenue & Customs

Whilst in our opinion that response dealt satisfactorily with the letter, it of course didn’t do much to allay the concerns of our client, who was now fearful of HMRC turning up to remove his three piece suite and his wife’s Stannah stairlift.

So we rang the number on the letter, only to be informed that they had no authority to provide us with any information. We should have guessed that already, because the letter was totally devoid of any information, other than that detailing the dire consequences of not paying an as yet unknown amount of money in double quick time.

So we then rang PAYE, who did have an authority to provide us with information.

‘How much does your client owe?’ asked the person from PAYE.

An authority to provide information they may have had, but an inability to supply it was patently obvious.

‘We were rather hoping you could tell us.’

Silence, followed by:

‘We can’t see your client owes anything.’

Snap.

After several minutes of questions and answers, we had an explanation. Not a satisfactory explanation; just an explanation.

Hospital consultant to petrified patient: ‘We’ll have to remove your leg.’

Petrified patient: ‘Why?’

Hospital consultant: ‘Because we say so.’

An explanation for sure, but as far from satisfactory as we are from Pluto.

HM Revenue & Customs Assumes Too Much

Apparently, certain assumptions had been made by HMRC’s computer (please see previous article Chris? Chris? Who on Earth is Chris from HMRC? for my views on that). The client was a contractor and we filed monthly CIS returns online. Tax deducted from subcontractors had been remitted using payslips in month 3 and month 6. Nothing was due for months 1 and 2 and 4 and 5.

So in its wisdom, HMRC’s computer ASSUMED that the client was paying PAYE quarterly and after month 9, when no remittance was sent – because no remittance was due – the nasty Debt Management section swung into action.

The client had no employees but the payslips make no differentiation between PAYE and CIS tax. Therefore, HMRC’s Assumption Department rides into action.

Long, long ago in a more polite and deferential land, HMRC would have sent a gentle reminder that no remittance appeared to have been made. A phone call from us would then have made the position clear.

Not now. HMRC leave their written, threatening equivalent of a severed horse’s head in your bed. Why? Because it’s assumed you haven’t complied and complicity is the mantra of HMRC.

What HMRC should set up is a Non-submission Of An Expected Form Or Payment Department. This would go a long way in preventing intimidatory threats of imminent release of the Mad Dogs of Debt Collection. 

Once again I think back longingly to that far off land of local tax compliance, where a simple phone call to a person I was probably on first names terms with, would resolve the problem immediately.

Can we assume that things can only get worse?

I think we can assume so.

Prepare to stand and deliver. [ Hmm ...penalties for late payment of PAYE/NIC..? - Ed. ]