Opinion

Don't ignore the taxman

It might seem obvious, but whenever HMRC write to you either personally or as a business, you'd be best advised to never ignore them. The case of Legg v HMRC illustrates the point wonderfully, if not comically.

HMRC wrote to Legg saying that he was linked to an account that had received £3000 in interest. Legg thought the letter was an error and ignored it. Naturally he was a little surprised - to say the least - to find that HMRC soon wanted payment of £275000 and were seeking a statutory demand to make him bankrupt.

Why was the figure so high? HMRC figured that to earn £3000 in interest requires a deposit of £250000 that HMRC concluded was undeclared income. This 'undisclosed income' was assumed to have been to paid for a number of years. Whether this was true or not is irrelevant. If Legg had immediately acted on the letter he could have explained if he was erroneously linked to the account, dealt with the payment faster thus avoiding HMRC assessments, which, in general, it is entitled to levy.

This was first published in February 2011

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