HCR Law Events

20 January 2021

Clear advice for those facing HMRC tax investigations

With HMRC under fire for the tactics it has used to collect debts from those hit by the Covid-19 pandemic, Sarah Woodall, HCR’s Head of Tax, is helping people struggling to cope with HMRC demands. Many are also dealing with depression and severe mental health difficulties on top of major business and personal problems.

She said: “About a third of my clients over the last month has described having anxiety or depression. I think that rate has doubled over the last 12 months. HMRC has an obligation to consider people’s special circumstances, but often that doesn’t happen until we challenge them.”

Special circumstances and reasonable excuse

Sarah, who advises both business and personal clients, regularly finds that her clients’ personal circumstances are not properly considered.

“I have had clients suffering from terminal cancer, depression or dementia, who have had to take their cases to tribunal or court in order to deal with their tax affairs, when they should be able to do so by negotiation.

Tax tribunal ordeal

“One man who was experiencing severe depression as a consequence of dementia asked to meet HMRC so he could explain his circumstances to them; the penalties they wanted to impose would have made him homeless.

“HMRC’s litigator repeatedly refused to meet and insisted that he must take his affairs to the tax tribunal if he wanted his special circumstances or his reason for non-payment to be taken into account. The client wept throughout two hours of giving evidence and was in such difficulty that he found it hard to speak. The tribunal found in his favour – the penalties proposed were reduced to nothing.”

What should taxpayers in difficulty do?

Sarah said: “There are lots of practical things which will help. For instance, writing to HMRC might be easier than talking to them, or ask a loved one to communicate for you; do ask for a contact email address. If you write describing your special circumstances, do keep a copy. Also:

  • Try to seek medical help – the current practice of phone consultations might even be easier than a face to face appointment with your doctor. If you are diagnosed with a particular condition, ask your doctor to send you a letter or email describing the particular difficulties you are experiencing, and offer a copy of that letter to HMRC.
  • If you feel if you cannot share your circumstances with your doctor, do not give up. The tax tribunal will consider what you have to say and, in our experience, will believe you.
  • If you can afford it, get proper legal advice from a tax expert. They will be well-placed to advocate for you.
  • If it is necessary to involve the tax tribunal, have faith. Our experience is that the tax tribunal does examine special circumstances in great detail, will listen to you and what you have to say, and will question HMRC’s approach if it has failed to take your special circumstances or reasonable excuse into account.
  • Pause before making a complaint against HMRC; it may slow progress and delays will not help you. A complaint can be made after your case has been concluded and our clients regularly recover their costs as a consequence of such complaints.”

What should HMRC do?

Sarah added: “HMRC has risen to the challenges posed by the pandemic magnificently in many respects – it needs now to improve its service to vulnerable people urgently.

“It is clear from the government’s own statistics that there has been an explosion of mental health challenges – why not give vulnerable taxpayers direct access to the extra support team within HMRC, for instance?

“Also, if senior leaders were routinely brought in to look at cases where special circumstances have been flagged up, they would see what was happening on the ground – it would help them help taxpayers better.”

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About the Author
Sarah Woodall, Head of Tax, Partner (Barrister)

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