HMRC no get out of jail free card
We love to talk about the weather in England, and so far this month there has been plenty to discuss. I was out on Wednesday and the wind was so cold I had to go and buy a scarf (a sign of old age) when I left the house the sun was shining and it was warm, it didn’t take long for all that to change.
Anyway, you are not here to hear about the weather but to find out what's been happening in the world of personal tax this week. The thought of hearing that HMRC had charity on their mind is not something that springs to mind, however, in an article printed this week, The Telegraph disclosed the truth about HMRC and caring for those affected by life-changing tax circumstances.
Find out what I had to say in my recent interview on the Wise Way podcast, and did you know that being in prison is not an excuse for not filing your tax return?
HMRC have a heart
More than 300 individuals have been directed to the Samaritans helpline by HMRC call centre personnel, as revealed by a Freedom of Information (FOI) request made by the Telegraph.
The collaboration between HMRC and the Samaritans commenced in 2022, and since its inception, 322 individuals have been guided to reach out to the charity, as disclosed by the FOI request.
Following the tragic suicides of 10 individuals after receiving loan charge demands, HMRC established this partnership with the Samaritans.
An estimated 40,000 individuals are currently grappling with loan charge demands, drawing HMRC's attention since 2019.
Approximately 200 HMRC employees are undergoing training provided by the Samaritans to assist individuals confronting unmanageable tax obligations when contacting HMRC.
In certain circumstances, officers will be assigned as a 'dedicated point of contact' for taxpayers undergoing circumstances that render them more vulnerable, in addition to training HMRC staff.
An HMRC spokesperson stated, 'We acknowledge and understand that addressing tax, financial distress, or indebtedness can exert significant pressure on individuals. We are dedicated to identifying and aiding all taxpayers requiring additional assistance.
'We have collaborated with Samaritans to identify those potentially facing vulnerable circumstances and have thus far referred 322 taxpayers to the charity.
'This service supplements the existing support we extend to all taxpayers necessitating additional aid in managing their tax matters.'
Did you know that HMRC also collaborates with numerous other charities such as TaxAid, Tax Help for Older People, and the Money Advice Trust.
This week I was very honoured to be asked to join Kirsty van den Bulk on her weekly podcast "The Wise Why". Kirsty offers an insight on how you can and should connect with your audience, if you have a couple of minutes I would suggest taking a look at her website, you might just learn something new today.
Kirsty allowed me to talk about tax and music, and afterwards, she also gave me some pointers on updating my YouTube channel so keep an eye out for the improvements coming soon.
If you prefer to listen whilst on the move you can always listen on " target="_blank">Spotify
No get-out-of-jail-free card is available.
A prisoner who received income from rental properties during his incarceration faced income tax charges and penalties, despite appealing the decision, ultimately being required to pay in full.
Mr Hermann, who spent a decade in prison from 2002 to 2012, continued to earn rental income from three properties throughout this period. However, he failed to declare this income, prompting HMRC to conduct discovery assessments and impose penalties on the landlord.
The assessments and penalties covered not only the duration of Hermann's imprisonment but also extended from the tax year 2002/03 to 2017/18. These assessments pertained to three properties purchased by the appellant in 2000 and 2001, one of which he resided in temporarily while renting out the other two.
In 2019, HMRC initiated inquiries into Hermann's income, resulting in discovery assessments amounting to £21,937.65 and penalties totalling £5,113.05, summing up to £27,050.70.
Hermann contested the tax liability for the years he spent in prison, arguing that he shouldn't be held accountable for income tax during this period. He claimed that he was prohibited from conducting business while incarcerated and that his estate agent, not an accountant, failed to manage his tax affairs adequately.
However, HMRC countered this argument, asserting that while conducting business from prison was prohibited, dealing with tax matters was permissible, a stance upheld by the tribunal judges.
Upon receiving the assessments, Hermann admitted to receiving rental income throughout the specified period. Section 29 of the Taxes Management Act 1970 mandates individuals to notify HMRC of their income tax liability within six months after the tax year.
Hermann's appointed property agent, Mr. Martin, passed away in 2014, leaving HMRC unable to ascertain his responsibilities regarding the properties. Hermann claimed that Martin was authorised to handle his tax affairs alongside property management duties, but there was no tangible evidence to support this assertion.
Regarding the income tax issue, tribunal judge Anne Fairpo stated that HMRC's assessments were fair and reasonable, emphasising that Hermann failed to substantiate any inaccuracies in the assessments.
Although Hermann could have cited his incarceration as a reasonable excuse to avoid penalties, this option was no longer viable due to the passage of time, during which any unresolved tax matters could have been addressed.
Ms Fairpo concluded that Hermann did not have a reasonable excuse for the failure to notify HMRC, thus upholding HMRC's decision not to reduce the penalty due to lack of special circumstances.
As a result, Hermann's appeal was dismissed, and he was obligated to pay the full amount of £27,050.70.
It may not come as a surprise but many Buy To Let landlords do not realise that the income generated needs to be reported to HMRC and that there is a disclosure scheme available to those who would like to benefit from preferable penalties other than the high penalties charged by HMRC on discovery. If you would like to know more about this scheme then please do not hesitate to contact me.
I hope you have enjoyed this edition of my newsletter, and found it both enjoyable and informative, if you have any suggestions or comments then please let me know it is always good to hear from you. In addition to the newsletter, I am also updating the website, so please take a look from time to time to see what is happening.
If I or the Tax Matters team can be of any assistance to you, your family or your friends then please do not hesitate to contact me at 01442 828006 or jreeves@taxmatters.tax
