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HMRC internal manual

Debt Management and Banking Manual

From
HM Revenue & Customs
Updated
, see all updates

Debt and return pursuit: foreign cases: Mutual Assistance in the Recovery of Debt (MARD) (Social Security Debts): disputes

About disputes

We are required under EU law to suspend our recovery action when either the other country or the debtor informs us that the debt we have been asked to recover is under dispute.

If the debtor tells us about a dispute before we have received notification from the other country, you should not suspend UK recovery action if the dispute has either:

  • already been rejected
  • not been properly made.

To be properly made the debtor must have raised the dispute with the appropriate:

  • competent body in the other country if the dispute is about their debt or Instrument Permitting Enforcement (IPE)
  • UK body if the dispute is about their liability to UK interest charged on the other country’s debt or the enforcement measures the UK are using to recover the debt.

Other country’s debt disputed

If the debtor tells you that they dispute the other country’s debt or their IPE, check:

  • the dispute has been properly made (in other words, it has been disputed in writing to the tax authority in the other country, according to the instructions of that country if known)
  • the case papers confirm the dispute has not already been considered and rejected by the applicant country; if the dispute has been previously considered, deal with under - ‘Continued dispute’ below
  • the dispute is obviously not artificial
  • if any part of the debt is not disputed; we expect them to pay the undisputed amount.

Questions to ask

To help you to decide if UK recovery action should be suspended, ask the debtor for the following information.

  • On what grounds are they disputing the debt?
  • What period does the dispute relate to?
  • How have they disputed the debt?
  • Who did they dispute the debt with and when (in other words, name and address of office and date sent)?
  • Has their dispute been acknowledged by the authorities in the other country?
  • If only part of the debt is in dispute, why hasn’t the undisputed amount been paid?

Ask for a copy of their dispute letter and the other country’s acknowledgment.

Remember that in sifting the dispute in this way, you are not looking at whether it has any merit; this is for the other country to decide. You are only looking to establish that they have followed the correct process for raising a dispute and that it has not already been rejected by the other country.

If the debtor tells you that they dispute the debt, but hasn’t done this in writing, explain that:

  • unless they formally dispute the debt, we have no authority to suspend our action and so therefore we have to continue with it
  • information about how to formally dispute the debt will be on the debt notification.

Continued dispute

The outcome of any previous and known disputes will be in the case papers. Where it is clear that the dispute has already been fully considered by the other country, but has been rejected, action to recover the debt should continue.

However, where:

  • the dispute has already been rejected but the debtor believes the other country has not fully considered their arguments (and it’s not clear to us from their response that they have)
  • we have a copy of the rejection letter
  • the debtor has written again to the other country to further dispute the debt and we have a copy

action to recover the debt should be suspended.

In these cases, the debtor may also have begun legal proceedings to dispute the debt in the other country.

UK interest or enforcement measures used disputed

If the debtor is disputing their liability to UK interest charged on the other country’s debt, or the enforcement measures the UK are using to recover the debt, they must raise that dispute with HMRC.

Where the dispute is about:

  • UK interest charged, refer the case to the Interest Review Unit to consider in accordance with normal practice.
  • UK enforcement measures being used, consider the dispute in accordance with the normal UK practices.

International Debt Unit, MARD team action

Other country notifies you that their debt is disputed

The other country will notify you of a dispute on an R019 or equivalent. They will also tell you what action they want you to take. On receipt, suspend UK recovery action and await the outcome of the dispute.

The other country may also ask you to either:

  • take precautionary measures to protect the claim
  • continue action to recover the contested debt.

If they do, send them an R033 and explain that we are unable to take the requested action.

Debtor notifies you that the other country’s debt is disputed

If you decide that UK recovery action should not be suspended, tell the debtor why and ask them for payment. If they fail to pay the debt, consider the next appropriate recovery action.

If you are satisfied that the entire debt is disputed:

  • suspend any further recovery action
  • send a completed R019 to the other country
  • write to the taxpayer using a MARD 40 SEES letter
  • BF for six months.

If the other country doesn’t respond within six months, write to them and ask them for an update using an H001.

If you are satisfied that part of the debt is disputed:

  • suspend recovery action on the disputed part of the debt
  • send a completed R019 to the other country
  • write to the debtor using a MARD 40 SEES letter
  • BF for 35 days.

If the debtor pays the undisputed part of the debt, notify the other country of the receipt of the payment in the normal way and BF the case for six months.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

If the other country doesn’t respond within six months, write to them and ask them for an update using an H001.

Update received from applicant country

When the outcome of the dispute is known, the other country will send you an R034 or equivalent to tell you what the outcome was and how to proceed.

If the other country rejects the dispute:

  • ask them for a copy of the rejection letter sent to the debtor
  • write to the debtor using a MARD30 SEES letter
  • BF the case for 35 days.

If the debtor pays the debt in part or in full, deal with as per the guidance at DMBM560670.

If the debt was disputed before the case was referred for enforcement action and the debtor has failed to contact you at the BF, consider the next enforcement action as per the guidance at DMBM560670. Note IDMS with details of the outcome of the dispute.

If enforcement action had already begun before the debt was disputed:

  • send a further enforcement warning letter if appropriate
  • update the relevant enforcement office
  • if the debtor fails to pay, ask the enforcement office to continue their action to recover the debt.

If the dispute was accepted in part or in full and no further debt is due:

  • write to the debtor to confirm that the other country has accepted their dispute using a MARD20 SEES letter
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • update the relevant enforcement office
  • close your case.

If the dispute was accepted in part or in full and part of the debt remains outstanding:

  • write to the debtor using a MARD20 SEES letter asking for payment of the balance
  • BF for 35 days.

If the debtor pays the outstanding balance in part or in full, deal with as per the guidance at DMBM560670.

If the debt was disputed before the case was referred for enforcement action and the debtor has failed to contact you at the BF, consider the next enforcement action as per the guidance at DMBM560670. Note IDMS with details of the outcome of the original dispute.

If enforcement action had already begun before the debt was disputed:

  • send a further enforcement warning letter if appropriate
  • update the relevant enforcement office
  • if the debtor fails to pay, ask the enforcement office to continue their action to recover the debt.

Debtor disputes UK enforcement measures being used

If the dispute is not artificial:

  • suspend further recovery action pending the outcome of the dispute
  • send an R019 to the applicant country to advise them of the dispute, the action you have taken and that precautionary measures cannot be taken.

Field Force action

Consider whether or not UK recovery action should be suspended following the guidelines under ‘other country’s debt disputed’ above.

UK recovery action should be suspended

If you decide that UK recovery action should be suspended:

  • return the papers back to the International Debt Unit, MARD team with your report via the MARD mailbox
  • close your case.

UK recovery action should not be suspended

If you decide that UK recovery action should not be suspended, explain to the debtor why and continue with your recovery action.

EIS Bradford action

Consider whether or not UK recovery action should be suspended following the guidelines under ‘other country’s debt disputed’ above.

UK recovery action should be suspended

If a country court claim form has not yet been issued:

  • suspend your action
  • notify the International Debt Unit, MARD team of the dispute and send them a copy of the dispute letter from the debtor plus the other country’s acknowledgement
  • transfer ownership of the IDMS record back to the International Debt Unit, MARD team
  • close your case.

If a county court claim form has been issued but judgment has not been entered:

  • notify the International Debt Unit, MARD team of the dispute and send them a copy of the dispute letter from the debtor plus the other country’s acknowledgement
  • ask the court to stay the proceedings, with liberty to restore once we have confirmation of the outcome.

If we have obtained judgment:

  • notify the International Debt Unit, MARD team of the dispute and send them a copy of the dispute letter from the debtor plus the other country’s acknowledgement
  • suspend enforcement of the CCJ.

If the other country rejects the dispute in full or in part, the International Debt Unit, MARD team will contact the debtor again and ask for payment. If the debtor still fails to pay, they will update you and ask you to continue with your recovery action for the outstanding debt.

If the other country withdraws the debt entirely and the county court claim form has been issued, the International Debt Unit, MARD team will update you.

UK recovery action should not be suspended

If you decide that UK recovery action should not be suspended:

  • explain the reasons to the debtor
  • continue your action to recover the debt.

If you consider that it’s appropriate to apply for Summary Judgment, do this after issuing the claim and after the debtor has filed either an Acknowledgment of Service or a Defence.

EIS Summary Warrant team action

Consider whether or not UK recovery action should be suspended following the guidelines under ‘other country’s debt disputed’ above.

UK recovery action should be suspended

If the case has not yet gone to court:

  • suspend taking Summary Warrant action
  • notify the International Debt Unit, MARD team of the dispute and send  them a copy of the dispute letter from the debtor plus the other country’s acknowledgement
  • transfer ownership of the IDMS record back to the International Debt Unit, MARD team
  • close your case.

If we already have a Summary Warrant, do not seek to enforce it. Notify the International Debt Unit, MARD team of the dispute. Send them a copy of the dispute letter from the debtor plus the other country’s acknowledgement.

If the other country rejects the dispute in full or in part, the International Debt Unit, MARD team will contact the debtor again and ask for payment. If the debtor still fails to pay, they will update you and ask you to continue with your recovery action for the outstanding debt.

If the debt is amended following the dispute, a fresh Summary Warrant should be obtained.

If the other country withdraws the debt entirely and the Summary Warrant has already been obtained, the International Debt Unit, MARD team will update you.

UK recovery action should not be suspended

If you decide that UK recovery action should not be suspended:

  • explain the reasons to the debtor
  • continue your action to recover the debt.

EIS Worthing or EIS Edinburgh action

Consider whether or not UK recovery action should be suspended following the guidelines under ‘other country’s debt disputed’ above.

UK recovery action should be suspended

If the petition has not yet been issued (England, Wales or Northern Ireland) or lodged at court (Scotland):

  • suspend your action
  • notify the International Debt Unit, MARD team of the dispute and send them a copy of the dispute letter from the debtor plus the other country’s acknowledgement
  • transfer ownership of the IDMS record back to the International Debt Unit, MARD team
  • close your case.

If the petition has been issued (England, Wales or Northern Ireland), or lodged at court in Scotland:

  • notify the International Debt Unit, MARD team of the dispute and send them a copy of the dispute letter from the debtor plus the other country’s acknowledgement
  • ask for an adjournment / do not object to an adjournment for a period of six to eight weeks in England and Wales.  In Northern Ireland, the debtor may ask for an adjournment of four weeks. Do not object to this. In Scotland, because the debt is in dispute, you should arrange to have the petition dismissed.

If the dispute has not been finalised after the adjournment period for England, Wales or Northern Ireland and there is no indication of when it is likely to be resolved:

  • if there is no other tax debt in the petition, seek dismissal of the petition; explain to the judge that:
    • the reason for the withdrawal is because a lengthy dispute period is anticipated
    • if the debtor is unsuccessful in their dispute we intend to re-petition if the debt still remains unpaid
  • if there is another tax debt in the petition, continue for the reduced petition debt subject to the de minimis limit.

If the other country rejects the dispute in full or in part, the International Debt Unit, MARD team will contact the debtor again and ask for payment. If the debtor still fails to pay, they will update you and ask you to continue with your recovery action for the outstanding debt.

If the other country withdraws the debt entirely and the case has already gone to the insolvency court, the International Debt Unit, MARD team will update you and ask for any court action to be withdrawn or dismissed as appropriate.

UK recovery action should not be suspended

If you decide that UK recovery action should not be suspended:

  • explain the reasons to the debtor
  • continue your action to recover the debt.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)