Problem paying your tax bill on time? If you are a large company, with billions in assets and paying dividends to your shareholders, then don’t worry HMRC will be generous. If you are a private company and you pay dividends don’t expect the same treatment.

HMRC’s troubling double standards were revealed during recent questioning of HMRC’s permanent secretary Dave Hartnett by the House of Commons Public Accounts committee (PAC). 

MP Stephen Barclay observed that Vodafone Plc, according to its announcement on 23 July 2010 agreed that a tax settlement comprising £800 million in the current financial year would be paid to HMRC over five years. Noting that HMRC’s guidelines say time to pay cannot be granted, except if the company does not have the assets. The MP went on to observe that Vodafone’s financial position is in the public domain. Its operating profit has increased from £11.8 billion to £12.2 billion and it is paying dividends.

Dave Hartnett refused to discuss the matter with the Committee citing taxpayer confidentiality.  

Harnett in Wonderland?

Last week the PAC questioned Mr Hartnett as to why he had let Goldman Sachs off almost £10 million in interest, when previously Vodapone had also escaped some £4 billion in taxes. It emerged that the Permanent Secretary has made sweetheart deals with two other, as yet unidentified corporates, and also that he realised he had made a mistake over Goldman but running rough shod over HMRC’s corporate governance procedures failed to correct it. To cap it all he also lied to MP’s about his involvement in the Goldman settlement. 

Mr Harnett consequently wrote to MPs in order to explain that he is unable to discuss these matters further because of taxpayer confidentiality.  

Time to pay: what is the position in the real world 

From HMRC’s guidance:  

"HMRC will only agree time to pay where they believe you are genuinely unable to pay in full.

When allowing extra time to pay HMRC will help people to schedule their debt payments so that they can pay what is owed and return to making future payments in full and on time.

As part of this process you are expected to investigate and seek other sources of finance and/or take action to restructure your business and/or personal affairs to enable you to meet your statutory tax obligations.

When HMRC do agree time to pay they will encourage you to set up a Direct Debit payment plan over the phone to help you make sure that you don't miss any payments.

HMRC is responsible for making sure that money is available to fund the UK's public services and expects people to pay their tax in full and on time."

See Can't pay 

A member of the Association of Taxation Technicians (ATT) recently complained that HMRC is now refusing time to pay agreements where a company has paid dividends. HMRC argues that dividends are paid out of taxed profits and so the company should have set aside its tax. Unfortunately, many companies pay dividends to save tax. Those in business realise ready cash it not the same as profits, it seems one rule for Plcs and another for small business.

 

 

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