In an article in our news section, we see that small businesses are feeling the heat from HMRC as never before. At TSA we aren't surprised. We've been witnessing this from HMRC for a very long time. It used to be the case that public services were funded from the taxes collected by government, but increasingly we see services funded in part by other means. For example, councils will have more powers to issue fines for traffic offences from December. Police have been pocketing money from speeding tickets for years. These "stealth" taxes have been a feature of government for decades now and so we shouldn't be surprised that HMRC have joined the party. There used to be a time when if there was no tax collect there was no penalty. That was a fair and equitable way to deal with taxation in my view. Escalating penalties for not filing a self-assessment on time, starting from 1 day late doesn't seem fair or equitable. Particularly when HMRC's own service levels are so appalling. You certainly won't see HMRC pay you £100 for not processing your tax refund in good time that's for sure.
What we've seen from HMRC is a complete lack of common sense in their approach to debt over the years. A few years ago we had a client who was waiting on a £20k refund. they had a CIS rebate due of £70k and corporation tax owing of £50k. They kept chasing for the £50k. in a conversation with HMRC they suggested to me that the client pay the £50k and that would stop the chase letters, then HMRC would refund the £70k eventually. Like I was at the time, you might be wondering if that particular operative lived in an alternate reality. Sadly I can't say it was very surprising, in fact you might say it was par for the course.
So what can we expect from HMRC nowadays in their approach? Well firstly, don't expect them to act morally, or with any common sense. Secondly, unlike businesses that use debt collectors as a last resort, HMRC will go to them very early in the recovery process. In most cases these debt collectors have no actual teeth, they aren't bailiffs. their letters and calls are designed to be intimidating, but in actual fact they are powerless and the debt collection will eventually be passed back to HMRC. Often the amounts being chased will not be at all accurate. Thirdly, don't expect it to be an easy or quick job for HMRC to offset credit balances on one tax against debt on another.
One current issue is where SEISS grants have been claimed. In these cases HMRC insist on reviewing the self-assessments. Unfortunately they don't have the resources. So it's not unusual to be owed a refund from HMRC (particularly if you are in construction) but because HMRC haven't updated the tax record with the latest return, to be chasing money that isn't owed.
So what can we do about all of this? Well in the first instance if you are behind with your taxes, it's better to speak to HMRC sooner rather than later to arrange a payment plan. If you don't owe HMRC any money and HMRC are chasing an amount because they are behind in process a self-assessment for example, call HMRC debt management and make it clear that you don't appreciate being harassed for money that isn't outstanding and ask that they stop immediately. If it continues, contact your local MP. HMRC's systems often send out penalty notices automatically and debt management only seem to stop these for a month at a time.
Having an accountant helps. We can advise whether a chase letter should be cause for concern. We can appeal penalties where there are reasonable grounds. Don't expect HMRC to tell you that you can appeal. We've not only seen them not giving advice on this, but giving outright erroneous and misleading advice. Telling clients they don't have the right of appeal for example when they do.
HMRC have stopped acting as a responsible tax service, trying to ensure that tax payers pay the correct amount of tax, and are aggressively trying to maximise tax receipts, regardless of whether penalties are fair and equitable or whether the tax is due or not. How often we hear pay it now and we'll correct it later. The Cynic could be forgiven for thinking that HMRC have become like the police, councils and other government departments, cash collectors that have forgotten their original purpose.
If HMRC are keeping you awake at night with threatening letters and phone calls, then give us a ring and let us deal with them and give you some peace of mind.