HMRC Using MARD: How does International Tax Recovery Work?

Mutual Assistance in Recovery of Debt (MARD) is no longer a theoretical mechanism used only in exceptional cases. HMRC increasingly relies on international recovery arrangements to pursue UK tax debts across borders, often long after a taxpayer has moved overseas or restructured their affairs.

For individuals and businesses affected, a MARD recovery can be sudden, complex, and intimidating, particularly where a foreign tax authority at HMRC’s request takes enforcement action.

This guide focuses on the practical and legal reality of MARD enforcement. It explains what happens once HMRC initiates recovery through international assistance, what rights taxpayers retain, how such action can be challenged, and what steps should be taken immediately when a MARD request is received.

Understanding MARD in the Enforcement Context

MARD allows HMRC to request assistance from overseas tax authorities to recover UK tax debts as if those debts were owed domestically in the requested state. Following the UK’s exit from the European Union, these powers primarily arise under the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters and the Protocol on Administrative Cooperation within the UK-EU Trade and Cooperation Agreement (TCA).

Once a request is accepted, the foreign authority may take enforcement steps using its own domestic recovery procedures. This can include freezing bank accounts, registering the debt locally, or initiating collection proceedings without reopening the substantive merits of the underlying UK tax assessment.

What makes MARD particularly powerful is that enforcement often occurs without prior engagement between the taxpayer and the overseas authority. In many cases, the first indication of MARD action is a demand or enforcement notice issued abroad.

When HMRC Decides to Use MARD

HMRC does not use MARD automatically. In practice, it is deployed where HMRC considers that domestic enforcement is ineffective or impossible. This commonly arises where a taxpayer has relocated, holds assets abroad, or operates through foreign structures.

MARD is frequently triggered following unresolved disputes involving Income Tax, Capital Gains Tax, Corporation Tax, PAYE, or VAT. It is also used where assessments have become final due to missed appeal deadlines, or where HMRC believes recovery is at risk due to dissipation of assets.

Importantly, HMRC’s decision to pursue MARD is an administrative one, but it must still comply with public law principles. Failure to consider relevant factors, procedural unfairness, or misuse of powers may provide grounds for challenge.

What Happens Once MARD Recovery Begins

Once HMRC submits a MARD request, the overseas authority determines whether it meets the relevant legal conditions. If accepted, the foreign authority proceeds to recover the debt using its own enforcement mechanisms. The debt is treated as if it were a domestic tax liability, even though it originates from the UK.

At this stage, taxpayers often discover that their ability to challenge the underlying tax liability is limited. Foreign authorities typically do not re-examine the validity of the UK assessment. Their role is enforcement, not adjudication. This makes early action essential. Delays can result in enforcement steps being taken before meaningful representations are made.

Can a MARD Recovery Be Challenged?

Although MARD is a powerful tool, it is not immune from legal challenge. Challenges can arise at both the UK and overseas stages, depending on the circumstances.

In the UK, taxpayers may challenge HMRC’s decision to issue or maintain a MARD request where there has been procedural unfairness, abuse of power, or failure to follow statutory requirements. The Courts have consistently held that decisions involving international cooperation remain subject to public law scrutiny.

In R (Gaines-Cooper) v HMRC [2011] UKSC 47, the Supreme Court affirmed the importance of legitimate expectation and fairness in HMRC’s conduct. Judicial Review is often the primary mechanism for challenging the process of the request, even if the underlying tax debt is technically final.

The Importance of the Underlying UK Tax Position

A critical issue in MARD cases is whether the underlying UK tax liability is final and enforceable. MARD should not be used to recover disputed amounts where appeal rights are still open or where enforcement is stayed.

In HMRC v Beadle [2020] EWCA Civ 562, the Court of Appeal confirmed that while the First-tier Tribunal has limited jurisdiction over public law disputes, the validity of HMRC’s underlying notices remains subject to the supervision of the High Court via Judicial Review. This makes correctly identifying the route of appeal; Tribunal vs. High Court, critical.

Taxpayers should urgently review whether assessments are valid, whether appeal deadlines were correctly communicated, and whether any procedural defects exist. In some cases, it may still be possible to reopen matters or apply for late appeals.

Time Limits and Historic Debts

One of the most concerning aspects of MARD for taxpayers is that it is often used to recover historic liabilities. While domestic time limits apply to the raising of assessments, once a debt is lawfully established, international recovery may occur years later.

However, time limits and limitation periods under the requested state’s law can still be relevant. Some jurisdictions impose restrictions on the enforcement of foreign debts, even where international assistance applies.

Disputes often arise where HMRC seeks to characterise conduct as “deliberate” in order to justify extended assessment periods. Such characterisations are frequently contested and can materially affect the enforceability of the debt.

Interaction with Double Tax Treaties

Taxpayers often assume that double tax treaties will prevent international recovery. In practice, treaties and MARD operate in parallel but serve different purposes. Double tax treaties allocate taxing rights and prevent double taxation, but they do not necessarily restrict recovery once a tax debt is established.

However, treaty provisions may still be relevant where the underlying tax assessment conflicts with treaty protections.

In Ben Nevis (Holdings) Ltd v HMRC [2013] EWCA Civ 578, the Court of Appeal confirmed that treaty interpretation must be based in commercial reality and international context, rejecting arguments that the “revenue rule” (which historically prevented cross-border tax collection) applied to modern mutual assistance treaties. While this strengthens HMRC’s hand, it also confirms that the specific terms of the relevant international instrument must be strictly adhered to.

What to Do Immediately if You Receive a MARD Demand

The most common mistake taxpayers make is engaging directly with the overseas authority without first assessing the UK position. This can prejudice later challenges and may accelerate enforcement.

Immediate steps should include:

1. Reviewing the basis of the debt and confirmation of its finality.
2. Assessing procedural compliance by HMRC under the relevant MARD instrument.
3. Determining if enforcement can be paused via UK intervention.

In some cases, representations to HMRC can result in suspension of the MARD request while matters are reviewed. Settlement may also be possible. HMRC retains discretion to withdraw or modify requests where a proportionate resolution is achieved.

How Lexlaw Can Help

MARD enforcement sits at the intersection of UK tax law, international cooperation, and public law. Effective representation requires a detailed understanding of HMRC’s internal decision-making processes, treaty frameworks, and cross-border enforcement mechanisms.

LEXLAW advises individuals and businesses facing MARD recovery action, including challenges to HMRC’s use of international assistance, disputes over the underlying tax liability, and engagement with overseas authorities. We provide strategic advice at every stage, from urgent intervention to longer-term resolution.

Our approach is legally rigorous, commercially focused, and tailored to the realities of international tax enforcement. If HMRC is seeking to recover tax through international assistance, specialist advice such as ours is essential. Our specialist Tax Solicitors and Barristers deliver expert technical knowledge, strong negotiation skills and respected advice, which can make a pronounced difference to eventual tax penalties, charges and liability.