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Managing Deliberate Defaulters
HM Revenue & Customs (HMRC) believes that over 90% of British citizens pay the correct taxes and duties and claim the right amount of reliefs. Those individuals, businesses and companies who deliberately pay the wrong amount or pay no tax or duty at all are classed as 'deliberate defaulters'. As part of HMRC's fight against deliberate tax evasion, it has introduced the 'Managing Deliberate Defaulters' (MDD) programme.
On this page:
What is HMRC's thinking behind the MDD programme?
HMRC believes that deliberate defaulters are 'high risk' (i.e. that they could try not to pay the correct amount of tax/duty again). Therefore, once identified, a deliberate defaulter can expect to have their tax affairs closely monitored under HMRC's MDD programme. This helps HMRC to ensure that the deliberate defaulters are complying with their tax obligations and that they have permanently changed their behaviour. HMRC believes that the MDD programme also provides reassurance to the majority of honest taxpayers that tax evaders will be penalised and have their tax affairs more closely monitored – thereby deterring them from evading tax in the future.
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Who will HMRC monitor?
Any individual or business who has deliberately evaded tax can be placed in the MDD programme. HMRC can place a partnership or company in the MDD programme along with the individual partners, directors or company officers. If a deliberate defaulter controls or has a controlling interest in other businesses (or starts another business) HMRC may also place those businesses into the MDD programme.
Anyone convicted of a criminal offence involving tax evasion is also likely to be placed in the MDD programme.
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What will HMRC monitor?
The extent of the monitoring will depend on the seriousness of the evasion and the potential likelihood that the defaulter will continue to evade tax. HMRC will check that all returns are delivered on time and are correct and complete and that all tax/VAT/duty payments and any registrations are made on time.
HMRC have powers to monitor a defaulter's tax affairs in a variety of ways including: -
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Will a deliberate defaulter know HMRC are monitoring them?
Yes. Once HMRC has completed its Compliance Check it will advise a deliberate tax defaulter in writing that they are subject of enhanced monitoring under the MDD programme and explain: -
- The minimum requirement HMRC will need them to meet; and
- What, if any, additional documents will need to be delivered to HMRC with their future tax returns.
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What happens if a deliberate defaulter fails the monitoring requirements or if HMRC find something wrong?
At the very least, a deliberate defaulter can expect HMRC to use its formal powers to pursue any failures to obtain the information needed to check whether the right amount of tax has been paid. In cases where further deliberate evasion is identified, HMRC may take criminal proceedings against the deliberate defaulter.
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How long will the monitoring last?
HMRC will continue monitoring a deliberate defaulter's tax affairs until it is satisfied that they are complying with their tax obligations and have corrected their behaviour. In most instances, the monitoring will last between two and five years.
HMRC will notify the deliberate defaulter in writing when they are being removed from the MDD programme.
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What can I do?
If you are (potentially) facing Penalties for errors in returns or documents or Penalties for failure to notify and believe that the error arose because of carelessness, you will need to demonstrate this and refute any suggestion by HMRC that you acted deliberately or deliberately with concealment. If carelessness is accepted, this will allow you to further argue that any penalty should be suspended and also avoid your details potentially being published as a deliberate tax defaulter on HMRC's website ('Naming & Shaming' Deliberate Tax Defaulters).
If you either deliberately did something wrong (or failed to do something that you should have done) or, worse still, that you did something wrong and then tried to conceal it, all is not lost. Representations can be made on your behalf with regard to the minimum requirements that HMRC will require you to meet under the MDD programme.
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How can OneE TDI help?
If HMRC believes that you are or have been a deliberate defaulter then you urgently need specialist help. If not, HMRC could publish details of your default on its web-site. This will be of real interest to banks/lenders, potential suppliers or customers not to mention the local or national media.
If you are (potentially) facing Penalties for errors in returns or documents or Penalties for failure to notify and HMRC are contending that your behaviour has been deliberate the best thing you can do is the 'right thing; the worst thing you can do is nothing. OneE TDI will help you make the right decisions.
At the core of OneE TDI is a highly experienced team specialising in all areas of tax disputes and investigations work. We offer confidential, non-judgemental advice to best defend our clients and have a proven track record in successfully managing all contentious tax matters. We provide an outstanding, cost-effective service, which results in tangible benefits and savings for our clients. We have up-to-date knowledge of all HMRC campaigns and disclosure facilities and are able to secure the best available terms for our clients.
Putting it simply, we take control of and manage all issues relating to HMRC Compliance Checks so that our clients can get on with their life. What price peace of mind?
Please see the Testimonials kindly provided by our clients (or their accountants or lawyers), which confirm our levels of client service.
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How can I contact OneE TDI?
If you would like a free, no obligation discussion with us please contact either Gary Rowson or Mark Taylor on 0800 652 6156 or complete and submit the online form below:
Whilst we endeavour to provide informative and accurate information, the content on this site is for general information purposes only and should not be taken to constitute tax or legal advice which must always be tailored to individual circumstances. Please contact us if you would like to discuss matters.
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HMRC Compliance Checks