T1: Collection in general

HMRC must make a demand

"(1) Every collector shall, when the tax becomes due and payable, make demand of the respective sums given to him in charge to collect, from the persons charged therewith, or at the places of their last abode, or on the premises in respect of which the tax is charged, as the case may require.

(2) On payment of the tax, the collector shall if so requested give a receipt." (TMA 1970, s.60)

Demand does not create debt

“The application proceeds on the basis of a misunderstanding of the function and effect of a demand by HMRC under section 60 of TMA. That section allows HMRC to serve a demand if there is tax due and payable. If there is no tax due and payable, then the demand is of no effect. The service of a demand does not create a debt or other liability if there is no pre-existing debt.” (R (oao Derry) v. HMRC [2015] UKUT 416 (TCC), §70, Morgan J).

County court/High Court has jurisdiction to determine whether a debt exists

“The normal step would be for the taxpayer to wait to be sued in the county court or the High Court and then to defend the claim made in accordance with the demand. The decision of the Supreme Court in Cotter establishes that the county court and the High Court have jurisdiction to determine the kind of dispute which arises in the present case as to whether a taxpayer owes the tax which is said by HMRC to be due and payable. Further, if a taxpayer can defend such a claim in the county court or the High Court I do not see why the taxpayer could not seek declaratory relief in advance of being sued by HMRC.” (R (oao Derry) v. HMRC [2015] UKUT 416 (TCC), §71, Morgan J).

Taxpayer can seek declaratory relief rather than waiting to be sued

“…if a taxpayer can defend such a claim in the county court or the High Court I do not see why the taxpayer could not seek declaratory relief in advance of being sued by HMRC.” (R (oao Derry) v. HMRC [2015] UKUT 416 (TCC), §71, Morgan J).

Judicial review of demand for payment not appropriate

“It may be that there is a public law decision involved in deciding to serve a demand but it is not a public law decision which creates or alters a liability and, where there is no pre-existing liability, the decision would not normally need to be quashed. It would be an unusual case where it would be necessary to apply to the court to quash the decision to serve a demand.” (R (oao Derry) v. HMRC [2015] UKUT 416 (TCC), §70, Morgan J).

County court/High Court has jurisdiction to determine whether a debt exists

HMRC may only collect tax on one of alternative assessments

“As regards that part of the taxpayer's first argument which suggested that these alternative assessments were invalid because they could lead to double taxation, we are quite satisfied that no element or risk of double taxation would have arisen in this case. As we have already indicated, the assessments are truly alternative and only one could be upheld on appeal.” (Lord Advocate v. McKenna [1989] STC 485 at 490 per Lord Allanbridge).

HMRC may only collect tax on one of alternative assessments

Penalties and interest recoverable as tax

Direct tax

"(1) This section applies to—

(a) penalties imposed under Part II, VA or X of this Act or Schedule 18 to the Finance Act 1998;

(b) penalties imposed under any paragraph of Schedule 56 to the Finance Act 2009 in respect of an amount falling within any of the following items of the Table in paragraph 1 of that Schedule—

(i) item 1, 12, 18 or 19, or

(ii) insofar as the tax falls within item 1, item 17, 23 or 24;

(c) interest charged under any provision of this Act (or recoverable as if it were interest so charged) and

(d) interest charged under section 101 of the Finance Act 2009.

(2) An amount by way of penalty …2 or interest to which this section applies shall be treated for the purposes of the following provisions as if it were an amount of tax.

(3) Those provisions are—

(a) sections 61, 63 and 65 to 68 of this Act;

(b) section 35(2)(g)(i) of the Crown Proceedings Act 1947 (rules of court: restriction of set-off or counterclaim where proceedings, or set-off or counterclaim, relate to tax) and any rules of court imposing any such restriction;

(c) section 35(2)(b) of that Act as set out in section 50 of that Act (which imposes corresponding restrictions in Scotland)." (TMA 1970, s.69)

Penalties and interest recoverable as tax

Collection in the Magistrates Court, County Court and High Court

"(1) Any amount due and payable by way of income tax, capital gains tax or corporation tax which does not exceed £2,000 shall, without prejudice to any other remedy, be recoverable summarily as a civil debt by proceedings commenced in the name of a collector." (TMA 1970, s.65)

"(1) Tax due and payable may, in England and Wales, and in Northern Ireland where the amount does not exceed the limit specified in Article 10(1) of the County Courts (Northern Ireland) Order 1980, without prejudice to any other remedy, be sued for and recovered from the person charged therewith as a debt due to the Crown by proceedings in England and Wales in the county court or in Northern Ireland in a county court" (TMA 1970, s.66)

"(1) Any tax may be sued for and recovered from the person charged therewith in the High Court as a debt due to the Crown, or by any other means whereby any debt of record or otherwise due to the Crown can, or may at any time, be sued for and recovered, as well as by the other means specially provided by this Act for levying the tax." (TMA 1970, s.68)

Evidence of means: statement by employer of salary is prima facie evidence in Magistrates and County Court

"(4) A written statement as to the wages, salaries, fees, and other earnings or amounts treated as earnings paid for any period to the person against whom proceedings are brought under section 65, 66 or 67 of this Act, purporting to be signed by his employer for that period or by any responsible person in the employment of the employer, shall in such proceedings be prima facie evidence that the wages, salaries, fees and other earnings or amounts treated as earnings therein stated to have been paid to the person charged have in fact been so paid.

(5) In subsection (4) “earnings or amounts treated as earnings” means earnings or amounts treated as earnings which constitute employment income (see section 7(2)(a) or (b) of ITEPA 2003)." (TMA 1970, s.70)

"The success of the hearing will depend largely on how well you have prepared. At the hearing you will be able to

• produce evidence of the defendant’s means

• question the defendant.

It is critical that your evidence of means is up to date. You should make sure that it relates to the period of two months immediately before the date of hearing." (DMBM666170)

Collection in the Magistrates Court, County Court and High Court