Managing Serious Defaulters

Where HMRC consider that someone has been a serious defaulter with regards to their tax affairs then HMRC can put them on the Managing Serious Defaulters programme (MSD).

What is the Purpose of the Managing Serious Defaulters Programme

HMRC consider that there is a high risk of people who have committed tax evasion doing it again and they want to make sure that people continue to pay the correct amount
of tax and take reasonable care with their tax affairs.

It is Gilbert Tax’s opinion that this belief is incorrect based on the businesses and individuals we help to sort their tax affairs with HMRC. Most people do not want to
go through another tax investigation for tax fraud and therefore they are less likely to do the same thing again.

Although a slightly cynical view, Gilbert Tax believe that the main purpose of the MSC is to keep the public accounts committee happy and to do something that takes little
effort but looks politically like strides are being made and for fantastic quotes in the press.

HMRC Definition of Serious Defaulter

HMRC defines a serious defaulter as:

  • Someone who has deliberately not paid the right amount of tax and has been charged a penalty for this
  • Identified during the Civil Investigation of Fraud process as being presenting a high
    risk of not paying all of their taxes
  • Someone who has been prosecuted by HMRC for tax matters
  • Someone who has been required to give a security to HMRC as a guarantee against future default
  • Someone who has been successfully pursued, by an Insolvency Practitioner, for a claim on behalf of HMRC (that is someone who has gone bankrupt and hidden assets are found to pay back HMRC)

Although there are no practical monetary levels for HMRC putting an individual on the Managing Serious Defaulters programme, in reality, for amounts less than £5,000
HMRC would not consider using the Managing Serious Defaulters programme.

Mainly it is used for people who have been dealt with as part of the Contractual Disclosure Facility where HMRC consider that there has been serious tax evasion.

What HMRC Do regarding Serious Defaulters

In effect HMRC state that they monitor the business for a number of years (usually between 2 and 5). This “monitoring” can be undertaken by reviewing the tax
affairs of an individual, a company or any business that the person on MSD is involved with. This can be as little as checking that they submit relevant tax returns (including
VAT and PAYE) on time, to them making payments of the duties owed.

HMRC make a great play on the fact that they can ask for additional information but this is not provided for in the legislation without following set processes that HMRC can
do outside of the MSD regime.

HMRC also say that they can make unannounced visits but again this is all legislated for under the normal tax provisions and most unannounced
HMRC visits will be undertaken on businesses where they are not involved with the MSD programme.

Thus, everything HMRC say that they can do under the MSD is happening to businesses that are not on the MSD regime on a regular basis.

Someone will know that they are on the MSD regime as HMRC will write to them. There are no rights of appeal about being on the MSD. When HMRC consider that the person
should come off the naughty step (out of the MSD) then they will write to the individual telling them that they are no longer in the programme.

Our experience is that clients on the MSD programme are only contacted if they fail to make payments to HMRC, otherwise we have not seen one single additional intervention by
HMRC whilst the clients are in the MSD programme.

Gilbert Tax understands that people sometimes make mistakes in their dealings with HMRC and that HMRC make mistakes in dealing with taxpayers. Many people do not know how to deal with HMRC or who to turn to for help resolve the tax dispute.

Gilbert Tax is a firm of tax advisors who specialise in resolving people's problems with HMRC. We have extensive expertise in dealing with all forms of tax investigations and tax disputes as well as with taking matters to the Tax Tribunal where agreement cannot be reached.

Gilbert Tax deal both directly with the individual who is under enquiry and also work with many firms of accountants supporting them in dealing with HMRC disputes and advising them on how to handle HRMC to get the best result.

The fact is that proper management of HMRC is the best way of reducing the tax, interest and penalty as well as the time taken in resolving any tax dispute.

Gilbert Tax are none judgemental and rigorously defend your position within the scope and parameter of the law. We take control and manage the process to minimise the interruptions that any form of tax investigation causes to an individual's life and business.