This is the new buzzword coined by HMRC to describe “tax cheats”. They have published a statement about how they are going to manage deliberate defaulters by a new programme of special rules. It seems to me that there is not much new in this programme; they always took a pretty vigorous approach to people who were fraudulent with their tax affairs. What is new is the fact that it has now been codified – perhaps so that nobody can be under any misunderstanding about how HMRC will react if they deliberately fail to meet their tax obligations.
One can entirely understand and support the vigorous scrutiny and pursuit of those who act fraudulently in tax matters. A recurring theme in the published material is that honest taxpayers need to be reassured that tax evaders will be penalised and their tax affairs closely supervised. Everyone will applaud that – but there is an anxiety that HMRC will punish taxpayers disproportionately for simply making a mistake where there is no element of deliberate default.
The plan is that somebody who is identified as a deliberate defaulter is going to be investigated thoroughly by HMRC. They will be told that they will be placed on the deliberate defaulters programme which means that they will have their tax affairs closely scrutinised – and this scrutiny would carry on for five years – and heaven help them if they do not alter their behaviour.
The danger here of course is that somebody could end up on the defaulters programme by accident. HMRC have become a little more understanding on this subject and seem now to accept that it is possible for taxpayers to make an innocent mistake.
However, I was alarmed to read the recent case of Alan Kenyon TC 968 in which Mr Kenyon claimed travelling expenses as a deduction from his self-employed income. HMRC did not consider the expenses were allowable, and the argument ended up before the Tribunal where HMRC claimed that he was negligent simply because he made a claim they disagreed with. Fortunately the Tribunal would have none of it – but this is a very serious and worrying approach. I bet it won’t be long before they run this argument again.