This is a cautionary tale, showing that it pays to heed HMRC correspondence.  A taxpayer had sold his business and then reinvested the proceeds in a letting business.  This taxpayer paid little to no attention to his tax affairs and spent a considerable amount of time travelling.

The taxpayer attended a meeting with HMRC in March 2013 where it was stated to the taxpayer that he was facing a very serious situation, his VAT, income tax and capital gains affairs were all in requirement of immediate attention.  At this meeting the taxpayer stated that there was no address for him but that for VAT purposes they should use the address of a particular property, that eventually became his home.  With now no way of contacting the taxpayer, HMRC issued assessments to his last known address, that had since be rented out to a tenant.

The assessments issued by HMRC were based on estimates as the taxpayer wouldn’t engage with HMRC as is their right under VAT, income tax and capital gains legislation.  As it was HMRC performing the estimations, income could be overstated and deductions understated.  The assessments amounted to some £2.5m, including interest.

The taxpayer owned a considerable number of properties that were let out.  HMRC obtained charging orders over these properties, meaning that they were treated as secured creditors.  HMRC had then applied to a court order to enforce the sale to they could recoup their outstanding liabilities.

By this point the taxpayer had started to engage with the process and applied to stall the sales holding his human rights would be infringed along with other grounds including that HMRC would be unjustly enriched.  The High Court found that the appeal the taxpayer made to the First-tier Tribunal (FTT) to adjust the assessments was made out of time and refused by the FTT.  The High Court found that his human rights were not adversely impacted and that HMRC were acting in accordance with legislation that had been passed by Parliament that had balanced the rights of the individual against the collective good of tax raising.  The High Court also found that all of the grounds put forward by the taxpayer had little merit and granted the orders to sell all of the taxpayer’s properties (including his home, though this order was deferred by a year).

HMRC will now obtain their funds through the forced sale of the taxpayer’s properties and as funds will be required promptly by HMRC best value may not be obtained by HMRC.

The decision can be found at: Revenue & Customs v Walsh [2023] EWHC 2213 (Ch) (13 September 2023) (bailii.org)

The taxpayer had held that the actual liabilities were around £650k-£700k but as he hadn’t engaged with HMRC they were lawfully allowed to seek payment of £2.5m irrespective of what the taxpayer’s actual liability was.  HMRC have been granted powers to forcefully take the taxpayer’s assets on estimations that could well be in their favour.

Please contact if you have any questions over correspondence from HMRC, we are experienced with tax investigations and can assist.  As this case highlight, inaction can have serious adverse consequences.