CH481300 - Managing serious defaulters (MSD) for specific customer groups: I&PB (Individuals and Public Bodies)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Managing Serious Defaulters (MSD) guidance applies to I&PB from 1 April 2012.

The process to be adopted will depend upon the business area in which the penalty arises.

Personal and Capital Gains Tax (P&CGTC) and Specialist EC

For cases arising in Personal and Capital Gains Tax and Specialist EC the standard Managing Serious Defaulters (MSD) process will apply, see CH480100.

National Minimum Wage (NMW)

Only those charged a penalty under Schedule 24 FA07 or Schedule 41 FA08 for deliberate behaviour are currently brought within the MSD process.

As NMW offences are outside the scope of that legislation these cases are not affected and no action is currently required in relation to MSD.

Public Bodies - Government Departments Team

For the majority of deliberate defaulters within Government Departments Team and for secure customers, responsibility for monitoring will remain within I&PB.

The only exceptions are Self Assessment customers dealt with by the Embassy Unit who should still follow the standard MSD process, see CH480100.

Public Bodies - Local Authorities, Universities, NHS Trusts, Charities, Trade Unions and Political Parties

The process will depend on whether a Customer Compliance Manager (CCM) is in place.

  • If there is a CCM - responsibility for monitoring will remain with I&PB (see below).
  • If there is no CCM - the standard MSD process should be applied, see CH480100.

Guidance for handling MSD cases retained within I&PB

Who is included in the programme?

All I&PB customers charged a penalty for a deliberate inaccuracy in a return (Schedule 24 FA07), failure to notify or wrongdoing (Schedule 41 FA08) or failure to file on time (Schedule 55 FA09).

Exceptions

Any customer making a full, unprompted disclosure of a deliberate default to HMRC with 100% reductions for the quality of their disclosure will not be included in MSD.

Action to Take

Once included in the Managing Serious Defaulters programme HMRC will:

  • closely monitor a defaulter’s tax affairs for a minimum of two years and up to a maximum of five years
  • if the defaulter has control of, or a controlling interest in, any business, we may also monitor that business.

Letters and Forms

Letter templates and standard forms used for MSD are available by using SEES: Local Compliance, Forms and Letters, MSD SDMU staff only (but open to all).

Notifying the Defaulter

For defaulters who have a CCM all communications with the defaulter will remain with the CCM. For those defaulters with no CCM I&PB team leaders will appoint a co-ordinator and all communications will remain with the co-ordinator.

When you have formed the view that the behaviour is deliberate you should warn the defaulter of the potential monitoring by issuing Factsheet CC/FS14.

When the defaulter enters MSD you should notify the defaulter:

  • of their inclusion in the programme
  • of the reason for their inclusion (a summary of their deliberate behaviour)
  • that Managing Serious Defaulters involves HMRC closely monitoring their tax affairs for a minimum of two years and up to a maximum of five years
  • that, if they have control of, or a controlling interest in, any business, we may also monitor that business
  • of the obligations that will be monitored:
  • all returns for completeness and accuracy
  • all returns are made on time
  • all payments are made on time
  • all new registrations are on time
  • of the changes required for the defaulter to improve their compliance
  • of any Additional Reporting Requirements (ARR) where the deliberate Potential Lost Revenue (PLR) is over £5,000
  • of the likelihood of increased compliance activity
  • of the potential outcomes if non-compliance continues
  • that monitoring will continue until there is evidence of a sustained shift to compliant behaviour, and we are satisfied that they no longer represent a high risk to us.

Use MSD2a opening letter for ARR cases; this contains standard ARR or MSD3a opening letter for non ARR cases (where deliberate PLR is less than £5,000).

Notifying the Serious Defaulters Management Unit (SDMU)

SDMU are notified of the customer’s inclusion into the formal monitoring programme by completion of NPPS. After selecting SDRS referral in NPPS (found in Extract Data) you will moved to the SEES side of the Serious Defaulters Reporting System. Select Yes to Is your directorate monitoring your case? (CCM cases etc) to advise SDMU that the directorate is monitoring the case.

Monitoring the Defaulter

The CCM or co-ordinator manages the defaulter by:

  • making additional checks on the defaulter (for example third party information) and completing an initial risk assessment
  • preparing an individual compliance plan for the defaulter
  • requesting ARR, enforcing regulations or amending approvals, where appropriate
  • monitoring and reviewing all ongoing filing and payment obligations and registration requirements
  • following up all instances where the defaulter fails to meet their pay and file obligations
  • risk assessing all returns and accounts for indications of continuing failure to comply
  • increasing the level of compliance checks for all taxes and duties proportionate to the risk
  • applying or instigating the commencement of any further sanctions required to assure compliance
  • re-assessing the initial risk assessment annually until the defaulter demonstrates sustained compliant behaviours.

The defaulter remains in the programme for a minimum of two years and a maximum of five years until there is evidence of a sustained shift to compliant behaviour and you are satisfied that they no longer represent a high risk to us.

Where the defaulter fails to comply, notify them of:

  • the obligation they have not met and
  • the sanction you intend to apply

using MSD8 failure letter

When the defaulter is to be released from the process:

  • send confirmation of their departure from the MSD programme using MSD11 exit letter
  • advise the SDMU that the defaulter has been released by email or telephone so that the SDMU database can be updated.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)