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Prison and Tax – the Forgotten Issue

Paul Retout of the Tax Academy on why people in prison need help to sort out their tax issues to prevent financial problems on release.

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The Tax Academy

This is a guest post by Paul Retout of the Tax Academy.

The Criminal Justice System impacts financially on every taxpayer in this country as each one of us contributes on average £600 to the public purse to cover the cost of re-offending (MOJ – Economic and social cost of reoffending 2019). Taxpayers entering prison will also be impacted in some way by HMRC, whether it be their PAYE record showing that they have left employment or those that are self-employed (particularly those in the construction sector) required to file a self-assessment tax return. HMRC are not informed when a taxpayer enters prison and so letters that remain unanswered sent to a previous address leads them to assume a prisoner is a non-compliant taxpayer and acts accordingly.

The Tax Academy CIC (‘The Tax Academy’) provides tax support to those that lack the support and expertise within prison to deal with their tax affairs including, but not exclusively, those with mental illness, learning difficulties, post-traumatic stress disorder (PTSD), stress, anxiety, drug and alcohol addictions.

The Tax Academy works both in prison and in the community with the Probation Service.

The work of the Tax Academy we believe complements work already being undertaken in the reduction of reoffending within prisons and removes a further barrier a prisoner can face when leaving prison.

The Problem

Prisoners often believe that being in the ‘prison bubble’ they are somehow sheltered from their taxpayer obligations. It is only after release when the prisoner is most vulnerable to re-offending that they find that is not the case and that outstanding tax, interest and penalties will be pursued by HMRC. Without specialist help, the tax problem will escalate with their assets ultimately being seized by third- party debt collectors often followed swiftly by bankruptcy.

No matter what the crime is, taxpayers still have a legal obligation to deal with their tax affairs whilst in prison or on licence.

Many self-employed taxpayers will also simply be abandoned by their accountants and advisors as there is little chance of being remunerated. The net result of this is that tax affairs can ultimately spiral out of control.

Organisations within prison often lack the tax technical expertise to deal with a prisoner’s tax affairs, and the latter are left to fester accumulating unnecessary tax charges including tax penalties and interest.

The move by HMRC into the digital world only exacerbates the issue that prisoners face in dealing with their tax affairs and the frustrations they encounter trying to be compliant.

Although much is undertaken in prisons to help prisoners find jobs or go self-employed there is little or no support in supporting them with their historic tax affairs or their future requirement to be compliant with HMRC.

In order to reduce reoffending, and to help prisoner taxpayers re-integrate into society we must be serious in helping them whilst in prison with their tax affairs rather than ‘hoping for the best’ with them on their release.

The Solution

The Tax Academy prepares prisoners by undertaking a detailed tax review, registering them for self-employment and CIS where necessary and the provision of free accounting software.

The Tax Academy CIC was created in 2014 after Paul Retout a tax specialist and Chartered Accountant was released from prison after four months in HMP Wandsworth and HMP Brixton. During his time in prison, he worked with A4e running tax seminars for prisoners and tax clinics from his prison cell.

In July 2015, The Tax Academy worked with HMRC on the Prisoner Customer Journey and this provided the opportunity for HMRC to explore the issues faced by prisoner taxpayers and to make a number of internal recommendations as to how HMRC should interact with prisoners.

The Tax Academy CIC now works in conjunction with HMRC in bringing prisoner tax affairs up to date and is the only prison organisation that sits on the HMRC Individuals Stakeholder Forum representing the prisoner sector and is also a member of the HMRC Voluntary Sector Tax Resolution Service (VSTRS).

For the first time prisoners have a ‘voice’ within HMRC and have an opportunity whilst in prison to resolve their tax issues in a fair and equitable way.

Once HMRC are made aware that a taxpayer is in prison their approach is sympathetic, compassionate, understanding and extremely helpful particularly in their approach to tax debt.

What we do

The Tax Academy undertakes the following activities with prisoners daily with the assistance of the HMRC Voluntary Sector Tax Resolution Service (‘VSTRS’).

  • Undertake a tax review with prisoner to ensure their tax affairs are up to date prior to release. This will highlight tax debt issues but also potential tax refunds that are due to the prisoner. Quite often tax refunds have been issued in the year of imprisonment, but to the wrong address and have not been cashed. These can then be reissued to the taxpayer.
  • Preparation of outstanding self-assessment tax returns, particularly for those in the Construction Industry under the CIS Scheme
  • Dealing with self-assessment penalty appeals for late submission or late payment of tax
  • Working with the prisoner with their tax debt and arranging a payment plan with HMRC including personal clinics within prison (where possible)
  • Where a determination has been made by HMRC, The Tax Academy CIC is able to provide assistance/undertake the Special Relief Claim on behalf of the prisoner
  • Prepares the prisoner for self-employment by registering them with HMRC
  • We can trace lost National Insurance Numbers
  • We provide ongoing tax support once that prisoner leaves prison.

 

The Tax Academy is a Social Enterprise and a ‘not-for-profit’ organisation’. All the work we undertake on behalf of a prisoner/ex-offender is free including filing of self-assessment tax returns, penalty appeals, and tax reviews and tax debt etc. We also provide free accounting software and advice on opening a business bank account for those wishing to go self-employed.

Currently we do not receive any funding for our work and in order to continue with it we rely on voluntary donations from prisoner families impacted by our tax intervention or a contribution from a tax refund that may be received.

We also provide a credit checking facility through Checkmyfile on our website

 

 We are here to help prison organisations and the Probation Service

Please contact the writer for further information:

Paul Retout

Tel: 01824 704535

Mobile: 07833 276400

Email: paul@thetaxacademy.co.uk

Website: www.thetaxacademy.co.uk

We are also in the 2020/21 Hardman Directory and write monthly tax related articles in Inside Time.

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2 Responses

  1. Great to see this ‘hidden’ issue being highlighted. At RIFT Social Enterprise we have been supporting people with convictions reclaim overpaid tax which is then used to support their resettlement plans (rent deposit, equipment for a job etc) and to sort out their tax affairs for the past three years. Our work across 32 prisons in conjunction with HMRC and the MoJ highlighted that around 40% of people entering prison who were self-employed were accruing penalties as a result of late/non-submission of their Self-Assessment form and the average HMRC-related debt we have supported is £2,800. Until prisons undertake an assessment on entry into the system, even down to the basics of asking ‘have you been self-employed?’, this will remain a hidden issue that only rears its ugly head when people will be expected to start repaying these penalties that they were previously unaware of. Not a great prospect to be facing immediately on release!

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