Businessman Reaps Whirlwind After Years of Inattention to His Tax Affairs

Those whose tax affairs are allowed to fall into disarray must live in permanent fear that HM Revenue and Customs (HMRC) will in due course descend upon them. Such anxiety proved well justified in the case of a businessman who was on the receiving end of seven-figure back-tax assessments.

Following an investigation of his finances, the man received four VAT assessments and 20 Income Tax and Capital Gains Tax assessments, together with various late payment penalties. The earliest assessments related to the tax year ending in 1993. After HMRC launched proceedings, he missed the deadline for filing a defence and a default judgment was entered against him for over £2.5 million.

HMRC subsequently obtained final charging orders over various properties he owned, including his home, and sought an order for their sale so that the proceeds could be used to discharge the judgment debt. Although he had made some payments following the sale of properties, the debt still stood at over £1.3 million and, with interest, was continuing to increase.

Arguing that the default judgment should be set aside, the man contended, amongst other things, that the tax assessments were overblown and that it would be a breach of his human rights were he prevented from defending HMRC’s claim. He said that he never intended to default on his tax obligations but had received poor advice which he did not question for many years.

In explaining his inattention to his tax affairs, he said that he had for several years devoted himself to caring for his wife, whose death from cancer had caused him considerable distress. More recently, he had been in poor health himself, having suffered a stroke and undergone surgery for prostate cancer.

In granting HMRC’s application, however, the High Court found that he had no real prospect of successfully defending the claim. Given that his remaining portfolio of properties was estimated to be worth £3.25 million, HMRC had indicated that it would only sell properties to the extent necessary to recover the debt. His family home was for the time being excluded from the order for sale.