Saturday wake-up calls loom for late taxpayers

Published on Saturday 31 October 2009 13:56

HMRC is becoming more aggressive in collecting money owed, writes Teresa Hunter

ANYONE who owes the taxman money should brace themselves for discomfiting telephone calls to their home on Saturday mornings, as Her Majesty's Revenue & Customs (HMRC) steps up attempts to get the money in.

The government is struggling with severe funding problems at a time when recession is cutting the tax bills of many working on short time, or who have otherwise seen their earnings fall. Officials are under pressure to collect all money owed.

HMRC says, where individuals are suffering genuine financial difficulties, it is trying to help by giving them extra time to pay. But anyone who fails to make due payment, even if they do not actually owe any tax, is being pursued vigorously.

The law allows HMRC to turn up on a taxpayer's doorstep and seize goods to the value of the tax owed, once it has received a warrant from the court. Alternatively, officials can ask the court to issue a writ to recover outstanding sums.

One Scotland on Sunday reader was furious to be rung at home early on a Saturday and threatened with legal action if he did not promptly pay a small amount the Revenue claimed he owed in respect to some investments. He said: "I thought this was outrageous, and extraordinarily heavy-handed, to call me out of the blue and threaten me with legal action over such a small sum.

"Part of the problem is this payments on account system which can mean you are billed for money you don't actually owe. I knew a small sum was technically owing, but I wasn't sure anything was owed, because of the fall in returns. Yes, I should have paid it. But that doesn't give the HMRC the right to ring me up on my morning off at home and start threatening me with legal action."

If taxpayers do not meet key deadlines to settle tax bills on 31 January and 31 July, they are subject to 5 per cent penalties and 3 per cent interest on top. The problem is that tax is paid in advance of actually settling what individual liability is through the payments on account system. These figures are based on the previous year's income, which for many is likely to be much higher than the tax actually owed. Many will have seen their income fall in the recession, and zero interest rates.

The reader added: "If I owe them any tax, I will pay it, and am happy to pay penalties and interest until then, but I object to being harassed at home on a Saturday morning."

HMRC denies being under any renewed pressure to get money in, although it acknowledges it is calling people at home on Saturdays. A spokesman said: "We are always under pressure to get money in. There is nothing new here. If people owe tax then they must pay it."

Chartered Institute of Taxation policy director John Whiting agreed HMRC is determined to collect money owed. He said: "The days when they took the attitude that you could pay when you're ready, and they'd charge you interest and penalties until then, have gone. They are quicker off the mark to pursue outstanding sums."

Mike Warburton, of business experts Grant Thornton, added: "The Revenue is certainly under instruction to collect in as much money as possible, as the government is incredibly short of cash. But they should not use bully-boy tactics, nor intimidate the public. They can take legal action if you don't pay your bills, but there are procedures to go through."

If people owe tax, HMRC should write to inform them. The next step is likely to be a phone call warning that further action will be taken. It is crucial to check what is actually owed, and if there is disagreement that the assessment is challenged. After that, taxpayers should receive a final demand. If they do not offer to pay within 28 days, HMRC applies to the sheriff court for a summary warrant which, if granted, offers no opportunity for a court challenge. It ultimately gives the authorities power to take money out of bank accounts or seize goods. Alternatively, it can pursue the money in the courts or declare a taxpayer bankrupt.

However, an HMRC spokesman said these were last-resort measures, which most taxpayers can avoid by offering to settle the amount at any time.

Whiting suggested making more phone calls was not necessarily a bad thing. "If it is done in a friendly manner, in a way that is designed to help people, it can be a good thing. Unfortunately, the best of intentions sometimes go awry."

The Taxpayers' Alliance said it had yet to hear of individuals being called on a Saturday morning. Political director Susie Squire said: "It is important people pay their tax, but there is no excuse for being heavy-handed. What bothers us is that it doesn't work both ways. If HMRC owes you money there can be long delays before you get it, and they can be very difficult to deal with, yet they come down like a ton of bricks if you overlook a deadline."

Make sure payments and filing of returns are up to date

This is easier said than done if you are self-employed, or have additional earnings or investment income which require a self-assessment form to be submitted.

Essentially, everything happens on a three-year rolling basis, where you pay tax based on the previous year, but before your current year's tax return is in.

For example, you will not be obliged to file your tax return for the tax year which ended in April 2009 until 31 January 2010. Yet you should already have made two payments on account. The first was due on 31 January 2009 and the second on 31 July of that same year. These two payments on account would have been based on your earnings in the tax year which ended April 2008. Each payment would have reflected half the tax paid in that year.

What to do if your earnings have fallen

Many people's payment on account may bear little relevance to their actual earnings, which may have fallen along with the recession. In this case you can write to the Revenue and ask for the payments to be reduced, or submit an SA303 form any time before the payment is due.

However, if it subsequently emerges that your earnings were higher than you claim, not only will you be charged penalties, but you will have used up all your brownie points with HMRC, which will not be at all pleased.

Can HMRC take action even where you don't owe any tax?

Sadly they can. As far as they are concerned, you have missed a payment once the due date for a payment on account to be made has passed.

They can begin calling, chasing and even take legal action, even if subsequently, when you have submitted your return, it emerges that no tax was actually due.

What if you can't pay?

It is best to be honest and explain the situation. It may be possible to negotiate a phased schedule of payments. But the Revenue tries to separate the "won't pay" and "will never be able to pay" from the temporarily financially embarrassed.

If they think you can pay, they will not be sympathetic. Similarly, if your finances are beyond salvation they will want to recover funds before any other creditors get there.

What can I do if they send the bailiffs in?

You can make an offer at any stage, which will enable them to call off the bailiffs. Similarly, if you are being asked for payments on account which do not reflect tax owed, the legal action should go away.