The end of the equitable liability concession
An Extra-Statutory Concession (ESC) entitled ‘Excessive assessments: equitable liability’ is to be withdrawn with effect from 1 April 2010.
The ESC was originally published in 1995 and was generally relevant to cases where the former Inland Revenue was seeking payment of obviously excessive taxes. This was not uncommon due to the pre-self assessment system whereby estimated assessments could become final. They often charged more tax than was strictly due in equity by reference to the missing tax returns and accounts once filed.
The effect of the ESC was also to protect creditors other than HMRC in cases of insolvency. At the time the ESC was introduced, HMRC had ‘Crown Preference’ and was entitled to repayment of its debt before other creditors. HMRC claim that a number of changes including the removal of ‘Crown Preference’ in 2003 have significantly reduced the need for this ESC.
HMRC acknowledges that there may be some exceptional cases where HMRC will still need to accept information outside of statutory time limits and adjust liabilities accordingly.