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Tax debt is always a highly emotive issue. We have all seen cases where HMRC has adopted a heavy-handed approach to the collection of small amounts, but if we are honest, we have also seen cases where people seem to escape for years without paying what they owe.
There is a difficult balance here. Those who pay their tax on time feel rightly aggrieved if other people seem to be able to put two fingers up to HMRC with impunity; but, equally, nobody wants HMRC to take drastic measures against people already suffering because of debt problems. Of all the jobs in HMRC I think that the one I would least like is to be the person in charge of deciding debt enforcement policy.
The latest figures for debt – see ‘Debt owed to HMRC trebles due to pandemic’ – show that the problem has become much worse as a result of the pandemic. A lot of this is due to deliberate policy decisions by government in allowing deferral of income tax and VAT payments – something most of us will support. There will have to be a reckoning at some point and I fear that it will be anything but straightforward. Advisers may struggle to obtain a clear picture of clients’ affairs. Was that money from the government a grant or a loan? Do any grants need paying back? Which receipts were taxable and which were tax exempt? What tax has actually been paid and which liabilities are still outstanding? I suspect in some cases the true position will never be established.
I hope that when HMRC does recommence normal debt collection activities – as it will and should do – agents will have brought their clients’ financial affairs into some sort of order.
It is not going to be an easy job.
If you do one thing
Could your clients benefit from the SME Brexit support grant scheme (tinyurl.com/hmrcbrstfund)? It might even cover some of your fees.
