HMRC Horror Stories: Tales That Keep Business Owners Awake at Night

Author: Russell Smith
February 24, 2017

Join our tax accountants from Leeds as they discuss nightmare experiences with HMRC, and how you can avoid the sleepless nights.

HMRC, otherwise known as Her Majesty’s Revenue and Customs, is a government body that I’m sure most of you are familiar with. Any small business owner reading this page will have at least some sort of relationship with the taxman, even if it’s often run via their accountant.

Responsible for the taxation of the whole country, HMRC are a seemingly all-knowing, all-seeing organisation. Most people who deal with HMRC only do so when filling in a tax return. After that, very little communication takes place. Some unfortunate souls, however, have a far closer relationship with the government body.

From these people, you can hear some real HMRC horror stories. Beware the taxman ladies and gentlemen, here is why…

Our Personal HMRC Horror Stories

As tax accountants, we deal with HMRC more than most. We have regular lines of communication with Her Majesty’s Revenue and Customers office, but even we cannot predict their often erratic behaviour.

Over the years, we’ve experienced some true horror stories, stories of HMRC demanding payments that weren’t due, or aggressively chasing tax bills that were only filed mere days ago. The strangest thing is that we’ve experienced tax bills go unpaid for years without even a nod from HMRC, while other, upstanding business owners have been hounded by the taxman for tiny infractions or mistakes.

Sometimes infractions aren’t even made. In some instances, we’ve had HMRC knocking at the door demanding money they’ve already been paid, simply because their offices failed to properly record it.

HMRC Proclaimed Worse Than Private Debt Collectors

We aren’t the only ones who’ve experienced erratic, aggressive HMRC behaviour. In a true HMRC horror story, the government body was declared worse than even private debt collectors when it came to settling bills.

In a study undertaken by Citizens Advice, it was discovered that HMRC didn’t even meet the standards of quality and service it sets for other debt collection agencies. People reported shocking circumstances of money being taken directly from bank accounts during ongoing disputes and a lack of compassion and flexibility when it came to those struggling to make repayments.

The Nightmare of a Tax Investigation

Tax investigations on businesses are known to be a trying time, but sometimes this can get a bit out of hand. Nick Morgan has posted an article on LinkedIn about some of the experiences he’s had with the taxman during investigations.

Primarily these include long-term tactics by HMRC, used to try and inappropriately and inaccurately slap heavy penalties on tax bills. In particular, he recalls circumstances of HMRC attempting to argue that outgoings were greater than income, therefore suggesting that the business owner is failing to record all their earnings, by using answers to lifestyle questions to create extreme and implausible examples.

HMRC Horror Stories Affect Us All

The Daily Mail reports on two HMRC horror stories. The first was the case of a mother unknowingly being paid extra tax credits, with HMRC then realising their mistake and demanding she pay a £1,000 bill. Imagine if that bill turned up in your mail?

The other horror story recounts a situation where a woman contact HMRC after her daughter left school to acknowledge that she was no longer owned child tax credits. HMRC responded by billing her for 12 months tax credits she apparently wasn’t entitled to, even though her child had only just left school.

These weren’t businesses, just normal people going about their business.

When HMRC Takes Things Too Far

It’s one thing when HMRC makes a stupid mistake, another when it goes against proper procedure entirely.

Recently, a single mother discovered she’d been stripped off her valuable tax credits, credits she needed to survive. Why? Because HMRC has made an assumption that she was married to her brother.

Without checking records or information, HMRC came to the conclusion that the lady’s brother, who shares the same last name, was her partner and banded them together under the same tax bill. This immediately cut off her tax credits.

After some fighting, and a lot of stress, she managed to sort out their blunder. But this HMRC horror story really goes to shows how unhinged the behaviour of the government body can be.

How to Avoid Your Own HMRC Horror Story

Small business owners are plagued by a fear of the tax man, and I’m sure these HMRC horror stories won’t exactly help matters. Many worry that the smallest, most innocent mistake will result in untold nightmares.

Keeping safe from the taxman, though, isn’t difficult at all. While you can’t stop them from making mistakes, you can bulletproof yourself and your business from long-term damage through proper management of your finances.

In our tax checklist infographic, we look at how to properly record your financial situation. If you follow our step-by-step guide, you should find you are well prepared in the event HMRC comes a-knocking.

Remember, though, a financial audit of your company can be a trying and stressful time. We advise that you consult an expert if HMRC do want to go looking through your business finances, even if you know everything is above board. Better to have somebody on your side who knows how HMRC work and how to handle them, the “worst debt collectors” in Britain.

Dealing with an HMRC horror story of your own? Need some help getting back on track? Our accountants in Leeds can help!

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