inTax successfully challenge a Joint Liability Notice

Our client approached us after receiving a Joint Liability Notice from HM Revenue & Customs (HMRC), making them jointly and severally liable for more than £500,000 in outstanding tax liabilities across three companies.

Obviously, this was an alarming situation, given the serious implications of a Joint Liability Notice, and it was essential to construct a rigorous response to challenge the assessment.

To ensure the most robust and well-researched response, we immediately requested an extension of time, allowing us to conduct a detailed investigation into the history of our client’s businesses.

Our objective was to understand the financial difficulties that had led to substantial HMRC arrears and assess whether the Joint Liability Notice had been applied fairly.

We conducted a thorough examination and simultaneously accepted HMRC’s offer to review the Joint Liability Notice decisions.

Given that a Joint Liability Notice is a powerful enforcement tool, we firmly believe it should be used in a reasonable and proportionate manner.

Legal considerations

Given Schedule 13 of the Finance Act 2020 is relatively new legislation, we examined HMRC’s own discussion documents leading up to its introduction.

These documents made it clear that the legislation was designed to tackle the minority who misuse insolvency as a way to evade tax liabilities.

In our professional view, our client did not fall within this targeted group, and this therefore formed the core argument in our representations to HMRC.

Addressing HMRC’s calculations

A key concern in our review was HMRC’s reliance on figures from the Administrator’s Report, specifically in relation to unsecured creditors.

HMRC had used these figures to determine whether our client’s tax liabilities exceeded 50 per cent of total unsecured liabilities, a critical test under Condition D of Schedule 13.

Upon careful scrutiny, we identified inconsistencies in the reported figures.

The final unsecured creditor figures in the Administrator’s Report did not accurately reflect the company’s true financial position immediately prior to insolvency.

Based on our calculations, the actual unsecured liabilities were significantly higher than HMRC had accounted for, which had a material impact on their application of Condition D.

Successfully challenging a Joint Liability Notice

Following our detailed representations, HMRC’s Solicitors Office agreed with our findings, concluding that the Joint Liability Notice should be set aside.

The result was that our client’s liability was reduced by over £500,000, and we brought the case to a successful resolution in under five months.

As you can imagine, our client was extremely relieved with the outcome as it safeguarded their financial future.

In my view, this case highlights the importance of rigorous financial scrutiny when dealing with HMRC investigations, which ensures your business is treated fairly.

We have dealt with numerous cases like these in the past and we’re confident that we could help you with a Joint Liability Notice, if you’re facing similar circumstances.

For help with a Joint Liability Notice, please get in touch with our tax investigations team.

You can get in touch with our friendly and experienced team on: 0203 675 8122 or email paul.sanders@intaxltd.com.

inTAX is a specialist tax disputes firm. We deal with disclosures, investigations, and tax enquiries of all descriptions, including COP9, fraud investigations, VAT fraud, tax avoidance, let property disclosures and tribunal appeals. However, we don’t just deal with the serious end of tax investigations; we are also happy to handle smaller enquiries, disputes and problems that can be equally as worrying for our clients