| WAMS Tax Ltd |
| Don't Let them Bully You - They are not always right |
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| Why Use Me? Well I know what some of them get up to |
What if the information is wrong? Yes thats the first thing to check with your client
that their information is correct. But also take the opportunity to ask your client "are
there any other "irregularities" that slipped your mind when you were busy getting the
previous years returns filed and always meant to raise it sometime - but then one year led to
another and then it became too much to think about.
OK so the information is correct - does that mean that there has been tax underpaid?
Clearly we would have to think out the simple explanations and the ways that could make it
all OK.. We might for example think of things like
(i) is domicile and remittances basis prior to 5th April 2008 relevant and
(ii) there might be no tax lost.
It would in these circumstances be totally inappropriate to send your clients documents that
are not required in relation to any tax liability. Equally the funds in the account may have no
taxation implications at all and have been put in an offshore account by a non-UK domiciled
person with none ever been even used or enjoyed abroad let alone in UK. There are also
other reasons that there might be no unpaid tax but too voluminous to list here. Just
because your client hasn't got the records or evidence doesn't make the monies taxable......
Inspectors will of course try and argue otherwise
Return or no return - think about whether your client has in fact filed a return for all years.
This would change the nature of any ultimate offence should one still exist at this point.
The Game is up -So we haven't managed to get our client out of the mire yet and yes
he/she/they/it should have returned the overseas interest at least in their returns. Would
there be any tax liability if the income was now included?
- No - we can still get our client off the hook and we don't need to acquiesce to the HMRC
demands.
- Yes - but we also need to think further and not prejudice our client's rights.
Is it 'Discovery'? - Presumably - and of course HMRC doesn't always lay out its full basis
for such god given rights to make such demands - the officer is here proceeding on the
basis of "discovery" but wait a moment. What has he/she discovered?
They need to discover that profits or income have been understated and so far all they have
alleged is that your client had an offshore bank account. This in itself probably only leads to
a likelihood that Case V interest may have been understated. If so, all you need to do is
disclose that the source has in fact been omitted. This does not give them the right to see all
and every entry on a bank statement. If therefore for example you were to provide a
statement from the financial institution that interest of the following amounts to the 5th April
each year (from the date the account was opened) were earned and omitted this would
satisfy and comply with all that might be "reasonably" required to resolve the issue.
OF COURSE you may well reasonably take the line that you should leave them to
take whatever discovery course they think fit and just not respond - this is not
generally recommended but is of course an option if they have got it horribly wrong as can
happen. The only recourse would be for them to make whatever discovery assessments
they could to the best of their judgement and ability and then you could appeal and take
matters forward as considered appropriately in the best interests of your client.
You would then have them in the situation of having to self scrutinise their actions and
realise that you are not going to be bullied into putting your PI policy at risk. Do otherwise
and you could be criticised for handing over documents and giving information that was not
statutorily required.
Remember that "discovery" only presently enables the HMRC to make
assessments it does not give them an automatic right to see documents that might enable
them to make the discovery that income has been underassessed and tax unpaid. The
position will, it seems, be different from 6th April 2009 when the new provisions will enable
them to possibly search out discovery by reasonable requests for documents and
information. But at present you might want to force them to put their thinking caps on - and
ingenuity to the test - and require the making of the assessments. Appeals might result in
your client also discovering what they have got. OK I know this is a remote possibility but you
never know and a little bit of out of the box thinking sometimes helps.
If of course your client has been neglectful and the offshore bank accounts held not
only the untaxed interest but also taxable - but untaxed - profits kept from the clutches of the
exchequer then of course you also require to both advise the client not only about the
statutory position - as laid out above in relation to the requests for documents etc – BUT
more pertinently the advisability of making an early and full disclosure of irregularities to
HMRC to keep the possible penalties and interest bill down. Reluctance to take a
reasonable line in this scenario may well harden attitudes and in the end be counter
productive to getting your client the best and quickest deal that could be going.
While this article has been inspired by a loosely and presumptuously worded letter from one
of the HMRC staff it did make me realise that this was in fact the second such request I had
seen in a matter of weeks. Equally it smacked in the same letter of an accounts enquiry
being generated just because they had information relating to earlier years. What
suggested this? Well it was the request for a full analysis of the £60 General expenses and
just over £1,000 Travelling and subsistence and a full A4 sheet of requests about balancing
and estimated figures where the taxpayer had included on the return an explanation that
accounts had not been prepared. A possible failure of the Inspector to actually look at the
tax return submitted and best practice required them to do this before opening an enquiry
We should not encourage HMRC to cut the corners and allow them to bully us into
giving them something that the Acts did not envisage.
Conversely of course remember that in addition to the normal enquiry avenue they can
have requests for information made under their formal Schedule 36 powers. You
do not really want to be forcing them down those routes as they can be expensive
to undo should it all go horribly wrong or you don’t realise that you cannot
“appeal” such notices without the extremely expensive judicial review route if
their actions are seen as reasonable. It might also harden attitudes and make an
otherwise acceptable explanation of non taxable receipts take on a full taxable mantle (in the
Inspector's eyes).
This article hopefully will prod your thoughts when the next "we have information" letter lands
on your desk. If you find that you need a specialist tax investigation adviser please feel free
to contact Bill Stevenson on 07751 720507 who will be pleased to get involved to
whatever extent is considered mutually beneficial to the client. This could be from
(i) taking the whole enquiry process off your hands - but leaving the control of the day to
day and continuing client with yourself (I am not interested in stealing clients)
and/or
(ii) through to providing a second opinion either orally or in writing
Bill Stevenson
I am sure that after the New Disclosure Opportunity ends we will be in for a spate of similar
abuses of their powers . Of course in future they will be able to make informal and formal
approaches "to test the water" so we will need to be on our toes and vigilant. If you need
help contact Bill on 0775 172 0507
We will also have registered doctors and dentists coming under scrutiny for their
Tax Health Plan and rumours about small accountants coming under the
microscope also have been heard. Interesting times ahead no doubt
Equally you can use the Feedback Form to send me a note of your problem and what you
would want by way of advice
that their information is correct. But also take the opportunity to ask your client "are
there any other "irregularities" that slipped your mind when you were busy getting the
previous years returns filed and always meant to raise it sometime - but then one year led to
another and then it became too much to think about.
OK so the information is correct - does that mean that there has been tax underpaid?
Clearly we would have to think out the simple explanations and the ways that could make it
all OK.. We might for example think of things like
(i) is domicile and remittances basis prior to 5th April 2008 relevant and
(ii) there might be no tax lost.
It would in these circumstances be totally inappropriate to send your clients documents that
are not required in relation to any tax liability. Equally the funds in the account may have no
taxation implications at all and have been put in an offshore account by a non-UK domiciled
person with none ever been even used or enjoyed abroad let alone in UK. There are also
other reasons that there might be no unpaid tax but too voluminous to list here. Just
because your client hasn't got the records or evidence doesn't make the monies taxable......
Inspectors will of course try and argue otherwise
Return or no return - think about whether your client has in fact filed a return for all years.
This would change the nature of any ultimate offence should one still exist at this point.
The Game is up -So we haven't managed to get our client out of the mire yet and yes
he/she/they/it should have returned the overseas interest at least in their returns. Would
there be any tax liability if the income was now included?
- No - we can still get our client off the hook and we don't need to acquiesce to the HMRC
demands.
- Yes - but we also need to think further and not prejudice our client's rights.
Is it 'Discovery'? - Presumably - and of course HMRC doesn't always lay out its full basis
for such god given rights to make such demands - the officer is here proceeding on the
basis of "discovery" but wait a moment. What has he/she discovered?
They need to discover that profits or income have been understated and so far all they have
alleged is that your client had an offshore bank account. This in itself probably only leads to
a likelihood that Case V interest may have been understated. If so, all you need to do is
disclose that the source has in fact been omitted. This does not give them the right to see all
and every entry on a bank statement. If therefore for example you were to provide a
statement from the financial institution that interest of the following amounts to the 5th April
each year (from the date the account was opened) were earned and omitted this would
satisfy and comply with all that might be "reasonably" required to resolve the issue.
OF COURSE you may well reasonably take the line that you should leave them to
take whatever discovery course they think fit and just not respond - this is not
generally recommended but is of course an option if they have got it horribly wrong as can
happen. The only recourse would be for them to make whatever discovery assessments
they could to the best of their judgement and ability and then you could appeal and take
matters forward as considered appropriately in the best interests of your client.
You would then have them in the situation of having to self scrutinise their actions and
realise that you are not going to be bullied into putting your PI policy at risk. Do otherwise
and you could be criticised for handing over documents and giving information that was not
statutorily required.
Remember that "discovery" only presently enables the HMRC to make
assessments it does not give them an automatic right to see documents that might enable
them to make the discovery that income has been underassessed and tax unpaid. The
position will, it seems, be different from 6th April 2009 when the new provisions will enable
them to possibly search out discovery by reasonable requests for documents and
information. But at present you might want to force them to put their thinking caps on - and
ingenuity to the test - and require the making of the assessments. Appeals might result in
your client also discovering what they have got. OK I know this is a remote possibility but you
never know and a little bit of out of the box thinking sometimes helps.
If of course your client has been neglectful and the offshore bank accounts held not
only the untaxed interest but also taxable - but untaxed - profits kept from the clutches of the
exchequer then of course you also require to both advise the client not only about the
statutory position - as laid out above in relation to the requests for documents etc – BUT
more pertinently the advisability of making an early and full disclosure of irregularities to
HMRC to keep the possible penalties and interest bill down. Reluctance to take a
reasonable line in this scenario may well harden attitudes and in the end be counter
productive to getting your client the best and quickest deal that could be going.
While this article has been inspired by a loosely and presumptuously worded letter from one
of the HMRC staff it did make me realise that this was in fact the second such request I had
seen in a matter of weeks. Equally it smacked in the same letter of an accounts enquiry
being generated just because they had information relating to earlier years. What
suggested this? Well it was the request for a full analysis of the £60 General expenses and
just over £1,000 Travelling and subsistence and a full A4 sheet of requests about balancing
and estimated figures where the taxpayer had included on the return an explanation that
accounts had not been prepared. A possible failure of the Inspector to actually look at the
tax return submitted and best practice required them to do this before opening an enquiry
We should not encourage HMRC to cut the corners and allow them to bully us into
giving them something that the Acts did not envisage.
Conversely of course remember that in addition to the normal enquiry avenue they can
have requests for information made under their formal Schedule 36 powers. You
do not really want to be forcing them down those routes as they can be expensive
to undo should it all go horribly wrong or you don’t realise that you cannot
“appeal” such notices without the extremely expensive judicial review route if
their actions are seen as reasonable. It might also harden attitudes and make an
otherwise acceptable explanation of non taxable receipts take on a full taxable mantle (in the
Inspector's eyes).
This article hopefully will prod your thoughts when the next "we have information" letter lands
on your desk. If you find that you need a specialist tax investigation adviser please feel free
to contact Bill Stevenson on 07751 720507 who will be pleased to get involved to
whatever extent is considered mutually beneficial to the client. This could be from
(i) taking the whole enquiry process off your hands - but leaving the control of the day to
day and continuing client with yourself (I am not interested in stealing clients)
and/or
(ii) through to providing a second opinion either orally or in writing
Bill Stevenson
I am sure that after the New Disclosure Opportunity ends we will be in for a spate of similar
abuses of their powers . Of course in future they will be able to make informal and formal
approaches "to test the water" so we will need to be on our toes and vigilant. If you need
help contact Bill on 0775 172 0507
We will also have registered doctors and dentists coming under scrutiny for their
Tax Health Plan and rumours about small accountants coming under the
microscope also have been heard. Interesting times ahead no doubt
Equally you can use the Feedback Form to send me a note of your problem and what you
would want by way of advice
| Bill Stevenson - Managing Director |
| Mobile:- 07751720507 or 01224 658962 bill@wamstaxltd.com |
| Bill Stevenson He can do it for you!! |
| shortest time I can manage |
This article is written as a result of having seen a couple of
sorry instances where HMRC have made requests for
information and it has all been given over voluntarily only
to find that HMRC then use it to delve deeper or go on a
fishing trip even. For professionals this is a difficult period
and even though you have take proper care and attention
your acceptance of HMRC demands could lead to trouble
not only for your client but also potentially your PI policy.
Taxpayers reading this may also better understand the
pitfalls waiting round the corner if you don't get reliable tax
advisers on your side when the HMRC come a "knocking"
or drop that fateful letter through the letterbox.
There has to be a suspicion from what I have seen that
HMRC are trying to cut corners to get through all the
"golden" information they hold and not apply the law as it
was intended. They should not be allowed....and YOU
are at risk - see Bill if you need advice or a second
opinion
The scenario goes -
HMRC have information that you have had an offshore
bank account at some time in the past. Please provide
copies of all your offshore bank accounts held at any time
in the last 6 years"
Have you received a letter like this and what should you
do? OK don't panic it will probably be directed at one of
your clients unless you have been unwise enough to invest
outside Switzerland/ Panama /Andorra etc.
You might of course be inclined to contact the client, get
the statements and send them off to HMRC. HOWEVER
Stop there!!! Why should you?
All the letter from HMRC says is that they hold information
and are they not being a bit naughty - read on below.
sorry instances where HMRC have made requests for
information and it has all been given over voluntarily only
to find that HMRC then use it to delve deeper or go on a
fishing trip even. For professionals this is a difficult period
and even though you have take proper care and attention
your acceptance of HMRC demands could lead to trouble
not only for your client but also potentially your PI policy.
Taxpayers reading this may also better understand the
pitfalls waiting round the corner if you don't get reliable tax
advisers on your side when the HMRC come a "knocking"
or drop that fateful letter through the letterbox.
There has to be a suspicion from what I have seen that
HMRC are trying to cut corners to get through all the
"golden" information they hold and not apply the law as it
was intended. They should not be allowed....and YOU
are at risk - see Bill if you need advice or a second
opinion
The scenario goes -
HMRC have information that you have had an offshore
bank account at some time in the past. Please provide
copies of all your offshore bank accounts held at any time
in the last 6 years"
Have you received a letter like this and what should you
do? OK don't panic it will probably be directed at one of
your clients unless you have been unwise enough to invest
outside Switzerland/ Panama /Andorra etc.
You might of course be inclined to contact the client, get
the statements and send them off to HMRC. HOWEVER
Stop there!!! Why should you?
All the letter from HMRC says is that they hold information
and are they not being a bit naughty - read on below.
The comments on this site are solely those of the author who retains the copyright. Each
enquiry has its own dangers and opportunities that require full and detailed considerations
and advice. No responsibility can be taken for any actions that the reader decides to take
(or not take) after reading the text and articles unless you engage with the company and
Bill Stevenson on a proper fee paying client/tax adviser basis.
enquiry has its own dangers and opportunities that require full and detailed considerations
and advice. No responsibility can be taken for any actions that the reader decides to take
(or not take) after reading the text and articles unless you engage with the company and
Bill Stevenson on a proper fee paying client/tax adviser basis.
