HMRC internal manual

Appeals reviews and tribunals guidance

ARTG3340 - Reviews and appeals for indirect taxes: Payment of tax pending the outcome: Assessing hardship applications

It is for the customer to demonstrate that payment of the disputed tax would cause them to suffer financial hardship.

Each case should be considered on the basis of the facts. The review officer who assesses the application should not make any decision until they have all the evidence and information, such as bank statements, audited accounts etc they need to form a complete picture of the customer’s financial position.

There is no statutory requirement for the taxpayer to provide any particular type of documents to support their case. However the burden of proof is on them and it may help prevent a rejection of the application (on the basis of insufficient information) if they provide the relevant documents detailed below.

We should obtain as clear a picture as possible of the customer’s financial position. In complex cases the review officer assessing the application may wish to consult an HMRC accountant.

If the review officer does not think that the customer has provided enough information to enable them to reach a decision on hardship, or they do not think that the application is acceptable they should write to the customer and refuse the application.

They should explain that if the customer wants to pursue the matter they should apply to the tribunal. They should also tell the Solicitor’s Office and send a copy of the letter they sent to the customer and release the suspended tax for collection.

If the review officer decides that the application is acceptable they should write to the customer to tell them their hardship application has been accepted. They should also warn that if their appeal is not successful they will be charged interest on the amount of the tax that has not been paid. The review officer should also tell the Solicitor’s Office and send a copy of the letter to the customer.

All information must be the most recent and except for the year end accounts must be no older than two weeks from the date the information request was issued by HMRC.

With respect to bank statements and management accounts, these must be dated as at the date of your reply to HMRC’s information request (or as close to that date as possible per the details in the table below).

Where information is not provided please provide an explanation as to why. It is expected that customers of a certain size would prepare most of the information below (where applicable) as standard practice.

  Hardship question Information to obtain
1 Are annual and/or Management accounts available for the customer’s business? If yes, a copy of the latest full accounts (to include strategic and directors’ reports, full notes and detailed profit and loss account), or any accounts currently in draft. Monthly management accounts for the period from the date of the latest available accounts to the date the information is requested from HMRC. Where management accounts are not normally prepared, provide a copy of the trial balance and/or the P&L and balance sheet from the accounting system/records.
2 Does the customer prepare a Cash flow forecast? If yes, a full cash flow forecast of the company’s requirements over a period of at least the next 12 months. This should include all income streams, revenue costs and capital expenditure. It should also identify the expected funding requirements throughout the year compared to the maximum funding available.
3 Does the customer hold a business/personal bank, building society or National Saving Bank account? If yes, up to date bank statements for all accounts held. Or facilitate provision of up to date copies of internet bank statements that include account number and the financial institution’s header(s) may be acceptable.
4 Does the customer have other financing arrangements such as an invoice financing, overdraft or loan facility? If yes, up to date statements and details of the facility limits, term and any other relevant terms and conditions (including charges over assets). Copy of related facility letter(s) where available.
5 Does the customer hold any stocks and shares? If so, details of stocks and shares.
6 Are the customer’s business premises freehold or leasehold? If freehold - date of purchase and approximate value, are premises subject to any charges. If leasehold - length of term, date of lease, rent payable and approximate value, details of any charge/mortgage outstanding.
7 Does the customer own the house they live in? If yes, approximate value, date of purchase, also amount of any outstanding mortgage and name of lender.
8 Does the customer hold any insurance policies? If yes, approximate surrender value, date(s) taken out, amount of the policy, amount of the premiums and the number of premiums paid.
9 Does the customer have any other assets or liabilities? Including directors’ loan accounts and related party balances. If yes, details of the balances at the application date, nature of the asset/liability and explanation whether these amounts can be repaid (assets) or details when payment is due (liabilities).
10 Has the customer tried to take out a loan to pay the amount in dispute? If yes, a copy of the response.
11 Is the customer a member of a larger group of companies  (domestic or international)? If yes, explanations regarding whether the customer might rely upon fellow group members, through the provision of finance or other assistance, to enable it to settle the debt in question in respect of amounts in question. Where this would not be possible, explanation should be provided.