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Mark McLaughlin CTA (Fellow) ATT TEP highlights possible sources of help and information for taxpayers with tax debts.

Mark McLaughlin

Help is out there!

In my capacity as a consultant to tax debt management specialists TaxDebts, I am sometimes asked where taxpayers (and advisers) can find help and information on tax debts. Fear and anxiety over tax debts is often the result of not knowing what is likely to happen when a tax bill cannot be paid on time. Will HM Revenue & Customs (HMRC) come knocking on the door? Could they take legal action? What is the best thing that the taxpayer can do in their particular circumstances?

Those taxpayers who, quite correctly, are prepared to face up to their tax debt problems head-on have a few possible options. They could seek professional advice. This will be the best course of action to adopt in many cases. Unfortunately, not everyone is able (or willing!) to pay the fee costs involved. In those cases, the options are to seek free professional help (yes, this does exist!) or to ‘DIY’ in dealing with the tax debt problem. Here are some pointers for taxpayers (and professional advisers) seeking help. The list is not exhaustive, and a search on the internet should help uncover even more sources of information and advice.

The starting point

It is important (for professionals in particular) to know the law regarding the collection and administration of tax debts. For individuals within the self-assessment system, the primary direct tax legislation is the Taxes Management Act 1970. For companies, the main provisions can be found in that Act, and also in Finance Act 1998, Schedule 18, which deals with administrative matters. Different rules apply to other taxes and duties, such as VAT, National Insurance contributions and Stamp Duties. Care is needed when checking tax legislation, because it is subject to regular amendment. The local library may be able to help when searching for the up-to-date law.

In addition to knowing the law itself, it is helpful to know how HMRC applies it in practice. HMRC produce internal guidance manuals, which are accessible (albeit restricted in parts) to the general public on its website (http://www.hmrc.gov.uk/). A list of their manuals can be viewed at http://www.hmrc.gov.uk/manuals/. The main procedural guidance dealing with tax debt recovery is the Debt Management and Banking Manual (http://www.hmrc.gov.uk/manuals/dmbmanual/index.htm), although information on the process of distraint is also available in their Recovery Manual (http://www.hmrc.gov.uk/manuals/recmanual/index.htm).

HMRC also produce a ‘Collection Series’ of leaflets dealing with the following tax debt matters in England and Wales (different leaflets are available in respect of Northern Ireland and Scotland – see http://www.hmrc.gov.uk/leaflets/c14.htm). The leaflets are available for download (in pdf format) from the HMRC website:

• Distraint – What it means for you (http://www.hmrc.gov.uk/factsheets/ef1.pdf)
• The Magistrates’ Court – what it means for you (http://www.hmrc.gov.uk/factsheets/ef2.pdf)
• The County Court – what it means for you (http://www.hmrc.gov.uk/factsheets/ef3.pdf)
• Bankruptcy – what you must do (http://www.hmrc.gov.uk/factsheets/ef5.pdf)
• Winding-up – what the company must do (http://www.hmrc.gov.uk/factsheets/ef6.pdf)

People who care

There are also various sources of free professional help and information. The degree of help available generally depends on the taxpayer’s personal circumstances.

Citizens Advice Bureau (CAB)

Most people are aware of the CAB. In addition to a network of local offices, the CAB offers an online information and advice service, called Adviceguide (http://www.adviceguide.org.uk/). This includes a general section on debt (in England) (http://www.adviceguide.org.uk/index/life/debt.htm) and a section dedicated to tax (in England), which includes a very helpful sub-section ‘Help with tax problems’: (http://www.adviceguide.org.uk/index/life/tax/help_with_tax_problems.htm)

TaxAid

TaxAid (http://www.taxaid.org.uk/) is a UK charity providing free tax advice to people who get into difficulties with HMRC and cannot afford to pay a professional adviser. The service is independent and confidential. The TaxAid website is a very useful source of information, including a section dedicated to tax debt (http://www.taxaid.org.uk/tax_debt.cfm).

Taxaid also offers a free telephone helpline service (0845 120 3779) and an e-mail facility (info@taxaid.org.uk) for those on low incomes who are unable to afford to pay for an adviser (typically with maximum income of £300 per week for a single person). Most straightforward questions can be handled in this way. However, if the problem is more complicated, Taxaid may be able to offer an appointment (in London or Birmingham) with a qualified tax professional. TaxAid even offer support to voluntary advice agencies and tax professionals giving ‘pro-bono’ advice.

Low Incomes Tax Reform Group (LITRG)

LITRG is an initiative of the Chartered Institute of Taxation, which gives a voice to those who cannot afford to pay for help with tax and tax credits. The great majority of members of LITRG are unpaid. LITRG takes a household income of £15,000 and below as ‘low income’ for the purposes of targeting its help.
The LITRG website includes useful information sections for:

• Pensioners (http://www.litrg.org.uk/help/pensioners.cfm);
• Students (http://www.litrg.org.uk/help/students.cfm); and
• Low income workers (http://www.litrg.org.uk/help/lowincome.cfm)

LITRG is not an advice agency as such. However, it will, from time to time on a discretionary basis, offer assistance to the general public. In addition, a ‘TaxHelp for Older People’ helpline is offered for pensioners (0845 601 3321).

…And there’s more

There are other bodies who, like those already mentioned, offer help and advice on tax-related issues in appropriate circumstances. These include:

• Community Legal Services Direct (http://www.clsdirect.org.uk/index.jsp);
• Scottish Legal Aid Board (http://www.slab.org.uk/); and
• Northern Ireland Legal Services Commission (http://www.nilsc.org.uk/)
• Probonouk.net (this website assists in finding the free legal help and assistance of lawyers who give their time free of charge to members of the public on a low income to help solve legal problems) (http://www.probonouk.net/index.php?id=home

Knowing where to look

It obviously helps when dealing with legal issues such as tax debts to know where to look for information (and, in appropriate circumstances, external help). Hopefully, this article provides a useful starting point in finding out more. As mentioned, the free professional help and advice offered by some organisations is mostly aimed at those with relatively low incomes. Those who can afford it should consider expert help on a fee-paying basis.

Mark McLaughlin CTA (Fellow) ATT TEP is a Consultant to TaxDebts (www.taxdebts.co.uk), who assist taxpayers with outstanding tax problems. He is a Tax Consultant to professional firms, writer and General Editor of TaxationWeb (http://www.taxationweb.co.uk/).