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Does the decision in the recent case of Haworth v Cartmel have implications far beyond insolvency in terms of the way HMRC (and other public bodies) deal with vulnerable individuals?

Ms Haworth suffered from mental health issues, including a phobia of opening letters. In August 2005, HMRC received an anonymous tip-off that she was trading as a commercial horse breeder, and they subsequently raised a Determination claiming £192,000 in undeclared tax.

Although they had been informed that Ms Haworth was not capable of managing her affairs, HMRC proceeded with enforcement action. In May 2008, a statutory demand was served on her in person, followed by a bankruptcy petition (again served personally) in July 2008. In August 2008 a bankruptcy order was made. She was not present at the hearing, and the Court was not informed of Ms Haworth’s difficulties.

In due course, Ms Haworth received assistance with her tax returns, and HMRC duly accepted that no tax was due. An application to annul the bankruptcy order was made, but by this time very substantial costs had been incurred.

The Court found that Ms Haworth had lacked relavant capacity at all material times, that she was a “disabled person” within the meaning of the Disability Discrimination Act, and that HMRC were aware of her disability. The Court found that HMRC therefore had a duty to make “reasonable adjustments” in the way they dealt with her, and that they had not done so. The bankruptcy order was annulled and HMRC ordered to pay the costs of the Official Receiver and Trustee.

This is, of course, an insolvency case, but are there wider implications for the ways in which HMRC and other public bodies (such as local authorities) deal with vulnerable taxpayers in future? Should agents be asking for greater latitude when their clients have difficulty in producing documents, for example, because of their mental state? And how far can this be taken?