Case Study: Dispute with HMRC over Notice of Underpayment

Sterling Law’s Solicitor, Kuldeep S. Clair, dealt with a case over the past ten months, which just ended recently, where we achieved the best possible result for our client.

Our client owned a car-washing business, a trade which admittedly is notorious for unsavoury practices, payment of below-minimum-wage rates for workers, and breach of working time regulations.

Notice of Underpayment

HMRC carried out a ‘raid’ on our client’s business last year, but solid evidence of any irregularity was singularly lacking. He was served a Notice of Underpayment, alleging that several thousand pounds of wages were outstanding to his workers. He was required to pay a penalty fine as well.  Not one of his small workforce alleged any breach.

Despite our representations from the time that we were consulted, HMRC refused to see reason. Unfortunately, their legal advisers followed the initial decision to take action against our client for failing to pay the Notice of Underpayment. We were left with no option but to appeal the Notice on his behalf in the Employment Tribunal. We were instructed accordingly.

Appeal Process

We duly issued a Notice of Appeal earlier this year, and proceedings leading up to it continued. We were given a date in September 2018 for the hearing. Meanwhile, a lot of preparation had to be done, including documents preparation of lists of documents, and witness statements and bundles.

We remained convinced of the justice of our case, based on the lack of proof available to HMRC. Our client was adamant that he had done nothing wrong.

The burden of proof was on HMRC to establish that he had had breach the strict requirements in question. They had no solid evidence other than vague suggestions that the business was unsustainable if run legitimately.

There were no opposing witness statements and no solid evidence of what employees were actually paid and what benefits they received. We pointed this out to HMRC, but their lawyers did not accept our position.

With a month left to the hearing, and after further correspondence, we suddenly received notification from a more senior reviewing HMRC lawyer, who had looked at the evidence which we had begged them to look at since November 2017. She had come to the conclusion that this was a case which indeed ought to be ‘dropped’ on the evidence. We were naturally delighted and sent a joint letter to the tribunal withdrawing our appeal.

Our client was very grateful at this unexpected and amazing result. It was a pity that it did not come sooner. Our client had since abandoned his business, because of his worries about the consequences of the Notice and his ability to trade again, or register himself as a company director at all. The consequences could well have been very serious. He was literally sick with worry, and indeed was spending time living abroad, because a close member of his family was (and continues to) suffer with leakeumia.

If you want top quality advice on any employment, tax, or company/commercial law matter, whether you are an employer or employee, please contact:

Kuldeep S. Clair

Consultant Solicitor and Advocate

Tel. 02078228599