MARD: How Tax Authorities Collect Cross-Border Debts
The Mutual Assistance in the Recovery of Debt (MARD) is an arrangement which allows a country’s tax authority to collect debts via other countries’ tax authorities and vice versa.
We’ve seen an increasing number of these MARD cases at PD Tax, yet it is a surprisingly little-known topic.
MARD Example: Susan
Susan was born in the UK and studied creative writing and literature at a UK university.
Whilst studying, Susan freelanced as a writer for local publications and received payments without tax/NICs being deducted via PAYE. Susan wasn’t aware she needed to register as self-employed with HMRC and complete tax returns to report her income.
Susan emigrated to Germany after she graduated, leaving no assets in the UK.
Years later, Susan received a letter from the German tax authority stating that she owed HMRC tax/NICs from her old freelance work and that, under the MARD rules, they were required to collect this from her on HMRC’s behalf.
What is MARD
MARD is a general term to cover a range of agreements between countries which allow one country’s tax authority to ask for assistance from another country’s tax authority.
These agreements have been made through the EU, the Council of Europe, the OECD, and through bilateral double tax treaties.
This reflects the trend of global tax cooperation as seen with other measures like the Common Reporting Standard and the USA’s Foreign Account Tax Compliance Act.
HMRC’s Powers and Obligations
In the case of the UK, MARD gives HMRC the power to
- obtain information,
- serve legal documents, and/or
- recover a tax, social security debt, or duty debt
on behalf of another tax authority, if the defaulting taxpayer is living in or has assets in the UK.
MARD also allows HMRC to make the same requests of other tax authorities for outstanding UK taxes.
If HMRC accepts a request, then the foreign debt can be recovered with HMRC’s full range of powers. This includes freezing bank accounts and seizing assets. Refunds from HMRC can also be used against foreign debts.
HMRC also reserves the right in some cases to charge its own late payment interest on top of interest charged by the applicant tax authority.
Payments and Appeals
A tax authority receiving a request isn’t required to consider a request’s substance. MARD is primarily a procedural exercise.
However there are some options for subjects of MARD including:
- paying the debt (with options for time to pay arrangements)
- disputing the debt with applicant tax authority
- disputing the UK’s enforcement measures or UK interest
Disputing a debt can suspend recovery action, but the tax authority receiving the request needs to see written evidence confirming a dispute had been property lodged in the country the MARD request arose.
There are also strict time limits that apply so it’s important that all MARD requests and the taxes that give rise to them are carefully considered to make sure they are actually in time.
If you have any questions about MARD or need help with a MARD demand you’ve received, please contact a member of our team.
Time to Correct Offshore Tax Position (8 March 2018)