Managing Serious Defaulters programme

HM Revenue and Customs (HMRC) manages customers who deliberately don't pay taxes through the Managing Serious Defaulters (MSD) programme.

This guide tells you what happens if you’re included in the MSD programme.

What’s a serious defaulter

HMRC considers as serious defaulters people:

  • charged a penalty because of their deliberate behaviour under specific taxes legislation
  • identified during a civil investigation of fraud, as presenting a continuing high risk
  • charged a civil evasion penalty for dishonesty
  • who’ve paid a security for VAT, Environmental Taxes, PAYE or National Insurance contributions
  • who tried to get out of paying what they owe by becoming insolvent - HMRC will only bring into the programme, people who are pursued by Insolvency Practitioners for recovery of money or assets on behalf of HMRC
  • successfully prosecuted by:
    • the Crown Prosecution Service in England and Wales
    • the Crown Office and Procurator Fiscal Service in Scotland
    • the Public Prosecution Service Northern Ireland in Northern Ireland
    • another prosecuting authority for a tax matter

Who’ll be monitored

HMRC can monitor any individual or business they consider to be a serious defaulter. If a business is a partnership or a company HMRC may monitor the:

  • individual partners, directors or officers of the company
  • partnership or company if they can’t identify which partners, directors or officers of the company are serious defaulters

In some circumstances, HMRC may monitor the partnership or company as well as the partners, directors or offices of the company. HMRC may also monitor any other businesses that a serious defaulter’s involved with. This includes new businesses that start under a new name or in a new capacity. For example, if a sole trader becomes a limited company or directors of an insolvent company start a new one.

If a company or partnership stops trading HMRC may monitor individuals who controlled it, or had a controlling interest. HMRC can also monitor the tax affairs of any other businesses that those individuals are involved with.

How I’ll know if this affects me

HMRC will write to you if they put you on to the MSD programme. They’ll also tell you what you must do while you are on the programme. HMRC will closely monitor you for up to 5 years to make sure you meet all your tax obligations. If you fail to meet your obligations and keep up to date, HMRC will review your tax affairs using their inspection and information powers.

If you keep failing to meet your tax responsibilities and keep deliberately defaulting HMRC may impose penalties. They can ultimately take criminal proceedings against you. If what you did or failed to do was deliberate HMRC may also publish your details.

How I’ll be monitored

How HMRC monitors you depends on what was wrong with your tax affairs. They’ll keep checking that you file all your returns and make all your payments on time.

HMRC can also:

  • make announced or unannounced inspection visits to your business to check business records or assets for your current accounting period
  • carry out a rigorous compliance check into all or part of your tax affairs

For VAT, HMRC may change your VAT accounting periods. If they believe tax is at risk, they can also stop you using schemes like:

  • cash accounting
  • annual accounting
  • flat rate or retail schemes

There is no monetary limit for being monitored. But if you’ve been charged a penalty for deliberately evading tax over £5,000, HMRC can make you give more information on your Self Assessment tax returns. This means you may have to supply detailed accounts and balance sheets.

Time limits for monitoring

HMRC will continue to monitor you until they’re satisfied that you’re meeting your tax obligations and you’ve changed your previous non-compliant behaviour. This includes you putting right any inaccuracies they identify. For most people this can last for between 2 to 5 years.

Complaining about HMRC’s decision to include you

If you disagree with HMRC’s decision to include you in the programme, or with any part of the monitoring you should contact HMRC’s Serious Defaulters Management Unit.

You can find their contact details on the letter you received from HMRC.

If you’re still unhappy with the decision you can write to HMRC at:

HM Revenue and Customs
Complaints Central Clearing
Team Manager
Ground Floor
1 Munroe Court
LS11 0EA

Information you must give HMRC

When you write to HMRC you will need to give:

  • your reference number
  • the address of the last HMRC office that contacted you
  • reasons why you think you shouldn’t be included on the programme
  • what you think HMRC should do to put things right

You can’t appeal against being included in the programme.

If you believe you don’t meet the criteria you can either contact HMRC’s Serious Defaulters Management Unit or you can ask for an independent review. You can find HMRC’s contact details on the on the letter they’ve sent you.

Published 10 December 2014