Recovery of EU Taxes by HMRC (MARD)

Can HMRC recover foreign tax debts?

Whilst it used to be a rule of English common law that the courts would not enforce the tax laws of other countries (see Government of India, Ministry of Finance v Taylor AC 1955) it has become a rather qualified rule by virtue in particular of The Mutual Assistance in the Recovery of Debt Regulations SI 2011 No.2931 and The Mutual Assistance in the Recovery of Debt (Amended) (EU Exit) Regulations 2020 as implemented by section 87 and Schedule 25 of the Finance Act 2011.

Under the regulations, HMRC can recover amounts in the UK in respect of which a request for enforcement has been made in accordance with the Directive by a tax authority in another European member state.

What is MARD?

Mutual Assistance in the Recovery of Debt (MARD) is an arrangement which allows a relevant authority in another country to ask HMRC for assistance in obtaining information, serving legal documents or recovering a debt when the defaulting taxpayer is living in, or has assets in, the UK.

The countries which are a part of this reciprocal arrangement are:

Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Republic of Ireland, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland and the United Kingdom.

Requests under MARD

  1. Requests for information – includes checking addresses, details of employment and assets of the debtor, a person liable to settle the claim or a third party holding assets, and establishing if further action is cost effective.
  2. Requests for notification – includes arranging for the service of legal documents.
  3. Requests for recovery – includes pursuing payment from the debtor, a person liable to settle the claim or a third party holding assets, using normal recovery procedures.
  4. Requests for precautionary measures – protecting a claim by for example seizing assets or freezing bank accounts.

What actions can HMRC take?

All foreign tax debts referred to HMRC under these arrangements are recovered through the same debt enforcement methods as UK income tax debts. HMRC can therefore take the same legal proceedings in relation to enforcement as they would have done if the tax debt arose in the UK and was payable to HMRC.

However there are strict rules and guidance which HMRC must follow in order to collect the debt for the foreign tax authority. Taxpayers are advised to view their historical correspondence with HMRC to see if HMRC have notified them of their intention. Taxpayers should also be mindful as to the date when the tax debt became due. If the debt became due five years before the request to the foreign tax authority, then they are under no obligation to collect the debt on behalf of HMRC.

HMRC will not be able to seek recovery of the debt if it is still being challenged by the taxpayer. If a taxpayer receives a notification from MARD and they are still under discussion with HMRC then both HMRC and the foreign tax authority need to be notified right away so that the collection of the debt can be put on hold.

How do you challenge HMRC’s MARD Letter?

The taxpayer may challenge the MARD letter if they do not agree with it even if HMRC have followed the correct procedure and the debt is not being disputed. Our Tax Solicitors and Barristers are regularly instructed to act for clients who are facing MARD distress and enforcement proceedings and demands from HMRC. We adopt a bespoke approach on these matters depending on our client’s individual needs.

Depending on the specifics of the case, we may be able to negotiate with HMRC and/or legally challenge the debt and/or the enforcement action taken under the Directive. If you are facing action from the HMRC MARD team do not hesitate to contact our UK Tax Lawyers for legal advice.

BREXIT: Future of MARD since UK left the EU

The withdrawal agreement for BREXIT has imposed a time restriction on HMRC’s usage of MARD directives. These directives will only remain in effect for a limited duration, specifically until five years have elapsed after the conclusion of the EU-UK transition period. Since the transition period ended on December 31, 2020, as things stand, HMRC can only apply the MARD directive until December 31, 2025.

However, methods such as Multilateral Convention on Mutual Administrative Assistance in Tax Matters can be used as an alternative to MARD for the collection of foreign tax debts. This convention has been developed by the Organisation for Economic Co-operation and Development (OECD). The existence of a certain cross over between the countries that use MARD and the members of OECD will enable HMRC to continue collecting tax debts even after the end of the transition period. Moreover, certain tax treaties between some countries will also provide room for co-operation regarding the collection of tax debts.

Expert London HMRC MARD Disputes Investigation Lawyers

If you need HMRC MARD Investigation advice, we are available to aid you at every stage of the HMRC investigate process. Members of our legal team have first-hand experience and knowledge of the internal workings of HMRC. We can provide you with the very best representation in negotiations with HMRC and defending all forms of HMRC fraud, tax inquiry, tax fraud investigation, criminal tax evasion and HMRC enquiries and investigations.

Our tax team specialises in successfully challenging HMRC decisions and will assist you in every aspect of the investigation. 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.

Want legal advice from Tax Solicitors on your case?

Our simple enquiry form goes immediately to our tax litigators in Middle Temple, London. Call us on +442071830529 from 9am-6pm.

Our Tax Disputes Solicitors & Barristers are available to give information and advice to assist you in challenging the actions of HMRC on behalf of another EU member state. Just call us on 0207 1830 529, or email [email protected]

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