Continuing with their drive to affect a permanent change in the tax behaviour of deliberate defaulters, from 1 April 2013 the Managing Deliberate Defaulters (MDD) programme became the Managing Serious Defaulters (MSD) programme.

From that date the MSD was also widened and now includes anyone:

• charged a civil evasion penalty for dishonesty
• who has given security in respect of VAT, Environmental Taxes, PAYE or NICs
• who attempts to use insolvency to avoid paying taxes owed (only those where Insolvency Practitioners pursue claims for recovery of money or assets on behalf of HMRC will be brought within the programme)

By way of background HMRC launched the MSD programme (formerly known as the Managing Deliberate Defaulters programme) in February 2011 to:

• deter known defaulters from returning to non-compliant behaviour
• effect a permanent shift to compliant behaviour
• deter potential deliberate defaulters
• reassure those who do pay their tax that HMRC does take action against deliberate defaulters

The original MDD programme brought in anyone:

• charged a penalty for a deliberate offence under specific taxes legislation or otherwise identified, during a Civil Investigation of Fraud, as presenting a continuing high risk to HMRC
• successfully prosecuted by the Director of Revenue & Customs Prosecutions or another prosecuting authority for a tax matter.

As with the original programme, HMRC will notify serious defaulters when they are entered on to the MSD programme and tell them what their obligations are. Serious defaulters who fall within the 2009 Budget measure for ‘Close monitoring of serious tax defaulters’ will be told what additional information they must give to HMRC with their Self-Assessment tax returns. This additional burden can last for up to five years.

While they are in the programme HMRC will closely monitor defaulters to ensure they are meeting all their tax obligations. If the defaulter fails to meet and maintain those obligations or they present what HMRC classify as a ‘high risk’, HMRC will undertake compliance activity under their inspection and information powers.