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Articles Employment 23rd Dec 2013

Haworth v HMRC


On 4 February 2011, the High Court handed down judgment in this important case, which puts the HMRC’s duties as a public authority under the Disability Discrimination Act 1995 in the spotlight.
The case is likely to be of significance for public authorities carrying out functions which may affect disabled persons, as well as for all practitioners acting for or against such public authorities.

The case concerned an Application made on behalf of Ms Haworth to annul or rescind the Bankruptcy Order made against her on the Petition of the HMRC.

The application was made on the basis that Ms Haworth lacked relevant capacity when the Statutory Demand and/or Petition were served and /or the Bankruptcy Order made, or that in serving the Statutory Demand and/or Petition and/or inviting the Court to make a Bankruptcy Order HMRC acted in unlawful breach of its duties to Ms Haworth under the Disability Discrimination Act 1995 (“DDA”).
Ultimately the Court annulled or rescinded the Order on the basis that Ms Haworth lacked relevant capacity at material times, and held that HMRC had clearly breached its duty to make reasonable adjustments in the conduct of the bankruptcy proceedings.

Ms Haworth suffered from a longstanding mixed anxiety and depressive disorder, which included a phobia or avoidance of opening letters. She bred horses as a therapeutic hobby and made minimal income from this activity.

In August 2005 HMRC received an anonymous letter “informing” it that Ms Haworth was a commercial horse breeder, and projecting her annual income as £100,000 per annum.

The letter resulted in HMRC raising a Determination that Ms Haworth owed back tax in excess of £192,000. It was this sum which formed the basis of a Statutory Demand raised by HMRC, and then the Petition which led to Ms Haworth being declared bankrupt.

HMRC had been informed by various means (including Ms Haworth’s mother) that Ms Haworth was not capable of managing her own affairs, did not open mail, had difficulty with forms, and that she kept horses only as a therapeutic hobby. HMRC nevertheless proceeded with enforcement action on the basis of the Determination raised.

In May 2008 the Statutory Demand was personally served on Ms Haworth who told the server that she was “under the Mental Health Act” and could not open mail (there was indeed a pile of unopened post at the door). Ms Haworth did not open the envelope containing the Statutory Demand.

In July 2008 the Petition was personally served on Ms Haworth, although she was not told what the significance of the document was.

In August 2008 the Bankruptcy Order was made in Ms Haworth’s absence, and in September 2008 a Trustee in Bankruptcy, Miss Cartmel, appointed.

HMRC later conceded that Ms Haworth owed no tax at all After the Bankruptcy Order was made Ms Haworth obtained assistance in filing tax returns, following which HMRC accepted that she in fact owed no tax. By this time significant costs had been incurred, including in relation to Ms Haworth’s horses, which had been removed from her by the Trustee in Bankruptcy and stabled elsewhere.

There followed various applications, including an application to annul which did not raise Ms Haworth’s capacity or DDA as an issue (permission to appeal raising capacity as an issue was refused).

On the intervention of new solicitors, a fresh application was made, putting Ms Haworth’s capacity and the DDA squarely in issue.

To read the full article click here

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