Managing serious defaulters

By Tolley in association with Guy Smith of inTAX Ltd
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The following Personal Tax 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

From 1 April 2013, the managing deliberate defaulters (MDD) programme has been replaced by the managing serious defaulters (MSD) programme.

Essentially the MSD programme represents an expansion ofthe previous MDD regime, in that more than just deliberate defaulters will not be subject to closer scrutiny by HMRC (see below).

Serious defaulters are regarded as high risk by HMRC. This is because the individuals and businesses concerned have demonstrated a willingness to deliberately evade direct or indirect tax.

The original MDD programme was introduced in February 2011 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 since its introduction. However, it is clear that HMRC felt that other high-risk taxpayers could not be included in the MDD programme due to the strict conditions as to who was classed as a deliberate defaulter and wanted to widen the remit ofthe programme.

What is the purpose ofthe 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
  • 4)reassure the compliant population that HMRC does take action against serious defaulters

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Who is a serious defaulter?

Under the new MSD programme, taxpayers are considered 'serious defaulters' if they have been:

  • charged a penalty for a deliberate offence
  • identified during a civil investigation offraud