Author Archives: Jamal Khan

Marble Commercial Contracting Limited TC 0656 [2018] – Default Surcharge

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The First Tier Tribunal has dismissed the appeal in relation to the default surcharge where the appellant failed to make a payment under the payment on account regime.

The appellant paid their VAT electronically to HMRC on the 7th day of the month following the end of the VAT period. However, as the appellant was registered to pay VAT under Payments on Account scheme (POA), VAT liability is required to be paid by the last day of the month following the end of the VAT period. This is slightly different as the additional 7 days normally allowed by electronic payments is not allowed for businesses subject to Payments on Account regime.

The taxpayer had put forward several reasons and excuses for the late payment including staffing problems, bank not processing payments on the last day and misunderstanding. These were not considered valid by the Tribunal and the appeal was dismissed.

Yechiel TC 0683 [2018] – Principal Private Residence Relief

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The First Tier Tribunal has issued it’s decision on whether a property qualified for the principal residence exemption. The Tribunal judges felt that a short occupation period of three months together with the initial intention for to live permanently in the property were somewhat of benefit to the taxpayer. That said, the main facts were that that the property had a single bed and no other furniture, Mr. Yechiel had most of his meals in his parents’ house and did his laundry there as well spending his leisure time in the parents’ house. Based on these factors the Tribunal decided that the property did not qualify as the principal residence and disposal was subject to capital gains tax.

Our analysis: We have recently been appointed to represent various tax investigation cases where the client claims for a property to be their main residence whereas the quality of residence is not there. Simply by living in a property for a short while before selling it does not normally make it your principal residence for tax purposes. There are a number of factors to consider and as this exemption is widely abused, there are more cases ending up in the Tribunal.

High flying businessman jailed following tax investigation

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A Yorkshire businessman Jason Butler has been jailed for 9 years following a complex tax investigation by HMRC Fraud Investigation Service. Mr. Butler had masterminded a £9.8 million VAT fraud involving a complex chain of offshore companies in the US, Gibraltar, Spain and the UK and used fake invoices. Mr. Butler used the funds from the VAT scam to live a lavish lifestyle including expensive cars such as a Rolls Royce, Ferrari, Lamborghini, a Mercedes SL350 and a speed boat. He also owned various luxury house in Marbella as well as 96 properties in Leeds. Read more…

Online traders Red Flagged by HMRC

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HMRC introduced a Joint and Several Liability (JSL) notices in 2016 whereby online trading platforms such as Ebay and Amazon etc could be held liable for any VAT evaded by their sellers if they are not removed from the site.

HMRC have now announced that following the issue of JSL notices to online trading platforms, over 4,600 online traders have been removed in the last two years. HMRC have also seen over £200 million of VAT being declared by offshore sellers following these notices.

HMRC have stated that during the last two years the number of VAT registration applications by offshore online traders grew to 58,000.

Our firm provides confidential advice to businesses where they have not declared any form of tax including VAT, income tax, corporation tax or capital gains tax etc and would like to make a full disclosure with minimal penalties.

Complex tax investigation closed

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This client was referred to us by a firm of accountants in North London. The client ran an Italian restaurant and had been subjected to a HMRC investigation for almost 3 years with tax assessments and penalties in excess of £130,000 (involving VAT, corporation tax and income tax). By the time the case came to us, it was fairly late as an appeal had been submitted to the First Tier Tax Tribunal and Statements of Case exchanged. When we reviewed the case and discussed the background with the client, we found there was new information that had not been made available to HMRC previously and could help close the matters outside of the court. After long negotiations, HMRC agreed to have an Alternate Dispute Resolution (ADR) meeting. At the ADR meeting, which went on for approximately 7 hours, we were able to put forward our case and convince HMRC that the assessments were excessive and unreasonable. HMRC officers understood the client’s position and finally agreed to reduce the liability to 10% of the original figure. This was a very big relief for our client as he was considering putting his company into liquidation and declaring bankruptcy. We are grateful to the HMRC officers for their professional behaviour and demonstrating their full commercial understanding in bringing this case to a closure.

Lo TC 0605 [2018] – Principal Private Residence

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The First Tier Tribunal considered if the tax payer’s occasional occupation at the property over a period of time amounted to her making it her principal residence. Although the tax payer tried to convince the judges that making the property her main residence was always her intention, the Tribunal was not convinced that this was the case. The Tribunal considered a series of factors and events in the tax payer’s life which pointed towards the fact that this property was not being used as her main residence. As a result, the tax payer had to pay the capital gains tax of £105,294 and penalties of £21,058.

Our analysis: In our view, this could have been concluded much sooner outside of the Tribunal with some form of a settlement which would have been better than the Tribunal result. For this reason, we strongly feel that specialist tax advisers should be appointed where a tax dispute is getting out of hand.

Golden Cube Ltd TC 06666 [2018]- VAT – HMRC Invigilation

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The First Tier Tribunal considered whether the VAT assessments raised by HMRC in relation to a Subway Franchise were excessive and unreasonable. HMRC had based their assessments on the fact that the standard rated sales during their selected periods of invigilation were higher than reported. The Tribunal judges concluded that (a) there was no evidence that the standard rated sales were suppressed, (b) the till accurately recorded the sales and (c) there were a number of reasons why the standard rated sales varied over a period of time such as weather, time of the day, promotions and the fact the heating oven had been out of order on a number of occasions. The Tribunal also noted that the times of the invigilation (mainly during lunch hours) was not a representative sample of the entire sales. The judges concluded that HMRC’s assessments were excessive and incorrect. The appeal was allowed.

Our analysis: This is very good judgement and will help with a large number of similar cases where HMRC have used the results from invigilations to raise VAT and tax assessments. We have won a number of similar cases and reached out of court settlements.

Jail for shop keeper for VAT fraud

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A London based shop keeper has been jailed for VAT fraud of £120,000. Mr. Alaina Imponge, resident of Hartnoll Street, Holloway, carefully used 7 seven limited companies for VAT refunds 2011 and 2014 for 85 mostly false repayment claims. HMRC became suspicious as his companies constantly made claims for repayments totalling almost £126,000. He was jailed for 3 years 12 November 2018. See more…

Tax investigation closed after one meeting

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This was a tax investigation that HMRC opened into a retail outlet. Having considered the case and the background, we invited HMRC officers for a meeting at our client’s premises where we explained in detail our client’s position and the nature of the trade. The HMRC inspectors asked a number of questions and were satisfied after the first meeting and decided to close the case after a few weeks without making any adjustments. The client was naturally very nervous at the beginning and was quite pleased with the outcome. We are grateful to the HMRC officers for their cooperation and quick understanding of our client’s business.

Our analysis: This case could have dragged on for a long time and is a good example of cooperation. The main factors for early closure were establishing a good relationship with the HMRC inspectors and providing the required information in an effective manner.

Food chain tax fraudsters jailed after tax investigation

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Four tax fraudsters who ran a well known chain of restaurants have been jailed for a period totalling 10 years. They were involved in a tax fraud totalling £800,000 including pocketing staff tips and under declaring the sales as well as falsely taking nearly £300,000 in tax credits. The fraudsters were named by HMRC as Sadiqur Rahman,  Mizanur Rahman, Mohammed Sharif Uddin from Wednesbury and Abul Kamal from West Bromwich. They spent the stolen tax money on luxury holidays, properties and sent large amounts of cash to Bangladesh. HMRC will also be selling their assets to collect the tax and penalties owed. See more….