10 January 2023
Certain HMRC announcements can appear innocuous on first read and slip under the radar without generating much attention. This is highlighted by the reminder provided in an HMRC update on 19 October 2022 to a previous announcement regarding the certificate of tax deposit (CTD) scheme . However, the potential implication, when properly considered, could see taxpayers losing up to a staggering £391m.
The CTD scheme allowed taxpayers to deposit monies with HMRC in return for a certificate, which could be encashed later, with the monies held by HMRC typically being subsequently allocated against specific tax liabilities as they crystallised. Provided the monies were deposited in advance of the due date for such liabilities, late payment penalty and interest charges were avoided. Deposits of over £100,000 also earned nominal daily interest for up to six years. A common use of CTDs was for cases involving tax avoidance schemes and other uncertain tax positions, where the technical arguments debated through the tax tribunals could take many years and where the value of the tax liabilities at stake were significant.
The scheme was first introduced in 1975 and ran until HMRC announced it was to be closed for new certificate purchases from 23 November 2017. HMRC will only continue to honour existing certificates up to 23 November 2023. Any person that holds CTDs must contact HMRC by this date to allocate them against specific tax liabilities. Alternatively taxpayers may choose to submit requests to encash the certificates and withdraw the amounts deposited before or promptly after this deadline.
Once the November 2023 date passes, HMRC advises that it will make ‘reasonable efforts’ to try to contact remaining certificate holders to repay the balances that remain unpaid and unclaimed. No explanation of what this will involve has been provided. However, if HMRC remains unable to contact certificate holders, it will regard any outstanding certificate balances to be forfeited.
Through an RSM freedom of information (FOI) request, HMRC has confirmed some startling statistics in relation to the unallocated deposits it holds.
- HMRC held £391,380,382 of deposited but unallocated monies belonging to taxpayers on 31 October 2022.
- There were 3,337 ‘live’ certificates held at this date with an average certificate value of over £100,000.
- These monies were deposited with HMRC over 43 consecutive years between 1975 and 2017.
- Over 75% of unallocated amounts were deposited during the last two years of the scheme: £165,871,007 in 2016 and £141,110,866 in 2017.
- The deposits are held under 2,549 customer references (some held more than one CTD) the majority of which, 2,372, were held by individuals.
HMRC will have no realistic prospect of contacting many of the certificate holders due to the passage of time and events such as death, changes of address and leaving the self-assessment system. With the current cost of living crisis, there must surely be a reasonable argument for any monies not claimed to be ringfenced and put towards helping those who are hardest hit by the current crisis - after all it is not HMRC’s money to keep. If not, it just becomes another stealth tax.