HMRC are proposing to use a fixed costs scale in debt cases successfully pursued via the courts in England and Wales. LITRG suggests safeguards are needed to protect the vulnerable.
Debts and court action
Inevitably debts to HMRC can arise which, even if correct and owed in law, are not paid. Sometimes this is because of a refusal to pay but in others, there is genuine financial hardship. Whilst we understand that HMRC’s processes aim to keep the latter type of case out of the courts so far as possible, sometimes they do unfortunately reach that stage – perhaps due to people’s fear of engaging in discussions with HMRC over the debt.
HMRC’s costs
In previous consultation responses, on the subject of HMRC seeking to recover costs of court action where they are successful against the debtor, we have said that:
we do not object to the principle of costs being sought (particularly in cases where taxpayers refuse to pay and the debt is high); but
we do not support HMRC seeking costs from people who are already unable to settle their debts as such action would simply increase their overall indebtedness to no purpose.
Therefore, in general, we think that the proposals in HMRC’s latest technical discussion document are fair but would emphasise that HMRC must:
exercise discretion in claiming costs;
give clear information to debtors if the costs are likely to be other than scale charges;
tell debtors if they have any legal rights to challenge an award of costs, particularly where they depart from the fixed scale and are instead based upon time spent by HMRC’s solicitors and other legal staff.
More specifically, we suggest that HMRC should not normally seek costs:
from those who it transpires genuinely can’t pay;
in tax credit overpayment cases;
where to do so would result in the debtor’s overall indebtedness being out of proportion with the size of the original debt.
To read our full response, visit the LITRG website.
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