Managing serious defaulters

By Tolley in association with Guy Smith of inTAX Ltd
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The following Owner-Managed Businesses guidance note by Tolley in association with Guy Smith of inTAX Ltd provides comprehensive and up to date tax information covering:

  • Managing serious defaulters
  • Introduction
  • What is the purpose of the MSD programme?
  • Who is a serious defaulter?
  • What happens after selection?
  • Who is monitored?
  • What is monitored?
  • Exemptions
  • Implications of non-compliance
  • How is the entry to and exit from the MSD programme notified?
  • Warning

Introduction

The Managing Serious Defaulters (MSD) programme is an enhanced monitoring programme for certain individuals and businesses who have been found to have deliberately evaded the tax system and who HMRC therefore consider are ‘high risk’. It looks closely at a defaulter’s tax affairs to ensure that they are complying with all their tax obligations and tackles ongoing risk through early compliance activity. HMRC’s aim is to deter people from defaulting in the future and to reassure honest taxpayers that serious defaulters will be penalised and their tax affairs closely supervised. It replaces the previous managing deliberate defaulters (MDD) programme from 1 April 2013 and represents an expansion of the MDD regime, in that more than just deliberate defaulters are now subject to closer scrutiny by HMRC. The original MDD programme was introduced to monitor individuals and businesses (sole traders, partnerships and companies) that deliberately got their tax affairs wrong (ie they were classed as ‘deliberate defaulters’). The programme was judged to be a success with some 3,000 taxpayers having been placed into MDD, but HMRC wanted to widen the remit of the programme as it felt that some high risk cases were being excluded because the original criteria were tightly defined. Serious defaulters are regarded as high risk by HMRC because the individuals and businesses concerned have demonstrated a willingness to deliberately evade direct orindirect tax.

What is the purpose of the MSD programme?

The programme has four key objectives. These are to:

  • 1)deter known defaulters from returning to non-compliant behaviour
  • 2)effect a permanent shift to compliant behaviour
  • 3)deter potential serious defaulters, and
  • 4)reassure the compliant population that HMRC does take action against serious defaulters

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Who is a serious

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