Author Archives: Jamal Khan

Tax investigation closed through Contractual Disclosure Facility (CDF)

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This client came to us from the Midlands and was already under a tax investigation for failing to disclose income. We considered the merits of the case and suggested that a full disclosure under Contractual Disclosure Facility (CDF) would be the most effective way to conclude matters in contrast to a lengthy exchange of correspondence with HMRC inspector resulting in tax and high professional fees. The proposal was put forward to HMRC inspectors and they agreed to receiving a CDF. A full CDF submission was prepared and submitted which was fully accepted by HMRC. The tax and penalties payable as a result were quite minimal compared to what had initially been estimated. We are grateful to HMRC officers involved for their cooperation and support.

Our analysis: This was an interesting case where our firm and HMRC worked in cooperation to bring an early and effective closure to a tax investigation. Had the conventional route of entering into prolonged correspondence and dispute been entered, this would have taken significantly longer and cost the client more in professional costs, tax and penalties etc. Although the CDF route may not be applicable in all circumstances but it is very useful to be able to identify the right strategy when approaching a tax investigation.

Hansard [2018] TC 06522

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The First Tier Tribunal judge ordered for the late filing penalties to be substantially reduced. The case was unusually heard in the absence of the taxpayer and his representative but went mostly in their favour. This case demonstrates the fairness of the justice system where the judges went into some depth to understand the appellants position despite not being present at the hearing.

Henderson [2018] TC 06528 – Tax penalties cancelled

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The First Tier Tribunal judge ordered for the penalties to be cancelled due to special circumstances with the taxpayers and their family tragedies including terminal illness of the parents and subsequent death. The judge found that there was no reasonable excuse but considered that the special circumstances took preference.

Businessman jailed following tax investigation

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Peter Davis, aged 58, has been sent to prison for 4 years. Mr. Davis, from London and director/ shareholder of Formula 1 Teamwear Ltd, had operated various shops in large shopping centres in London, Glasgow, Liverpool and Cardiff together with few smaller shops and websites. In order to retain his businesses going and to fund his lavish lifestyle, Mr Davis fraudulently submitted seventeen VAT returns from 2009 and 2013, and fraudulently claimed £961,307. Mr. Davis also owned an Italian restaurant in central London but under declared his sales by more than 50%. He had made fraudulent claims for VAT of £58,507. Read more…

Woman jailed for VAT fraud

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Maureen Carpenter, aged 52 years, has been jailed for eighteen months after a prolonged investigation by HMRC revealed that she had been filing fraudulent VAT returns in relation to Maureen’s son’s company Booze Booze Booze Ltd. Her intention was to avoid the right VAT to HMRC and to pocket the amount saved. Maureen Carpenter was been ordered to £250,000 within 3 months or having to face additional 3 years in jail and still owe the money. Read more..

Code of Practice 9 case closed

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This case was referred to us by an accounting firm in London. The client was under Code of Practice 9 investigation and had been let down by his previous tax advisers in Wales who claimed to be experienced forensic accountants.The client has over 10 years of undisclosed income from various sources. Our tax investigation specialists carefully reviewed the case and made the required disclosure to HMRC. A tax liability was agreed that was accepted by both HMRC and our client.

Our analysis: Code of practice 9 cases require significant experience of handling tax investigations and the tax law. If care is not taken, the immunity from prosecution can be lost and can result in custodial sentences.

Large VAT investigation successfully closed after 9 months with no tax to pay

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This client is based in Essex and provides transportation services. The client had received a VAT investigation going back four years and HMRC were initially asking for a substantial tax amount together with penalties and interest. Our tax specialists considered the case in depth a found that the basis of VAT assessments raised by HMRC were incorrect. We sent our technical analysis together with supporting documentation to HMRC. Initially, HMRC refused our technical position and requested further supporting documentation. After several exchanges of technical correspondence the HMRC officers accepted that our position had been correct from the outset and that no tax was due by our client. To make matters even better, HMRC accepted that our client was due a tax refund. We are grateful to the HMRC officers involved in this case for their practical approach towards resolving this fairly complex matter.

 

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.

HMRC’s VAT and Customs investigation closed after one meeting

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This client runs a retail outlet in London and had received a VAT and Customs investigation from HMRC. The client was naturally quite nervous despite being up to date and having paid all their taxes due. Our tax specialists reviewed the client’s records in depth and proposed to meet with the HMRC inspectors. The meeting lasted for approximately an hour and soon HMRC officers accepted that there were no major issues with the company’s VAT and Customs liabilities and that the client’s arrangements were in good order. This was subsequently confirmed in writing by HMRC. We are grateful to the HMRC officers involved for their quick understanding of our client’s business and their pragmatic approach bringing the enquiry to a closure.

 

Our analysis: This was an interesting case where our firm and HMRC worked in cooperation to bring an early and effective closure to a tax investigation. We have seen numerous cases where due to the wrong or defensive stance taken by ordinary accountants, the relationship is tarnished and causing irreversible damage to the enquiry.

Worldwide Disclosure Facility – Closing on 30 September 2018

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The Worldwide Disclosure Facility was initiated by HMRC in 2016 to allow tax payers with offshore (non UK) income to make a full disclosure and avoid large penalties or HMRC prosecution. The disclosure facility has been widely used by UK and non UK residents and settlements reached for tax payable. HMRC had announced that the  Worldwide Disclosure Facility will be closing on 30 September 2018. This means the option to make a disclosure at a lower penalty will no longer be available.  From 1 October 2018, individuals with undeclared offshore income will need to make a disclosure through Requirement to Correct rules. The new rules under Requirement to Correct will impose heavier fines and sanctions.

 

Any non UK citizens living in the UK are required to make a full declaration if they are receiving offshore income even if that is being kept offshore and not brought into the UK.

As we are approaching the deadline of 30 September 2018, we have received a large number of queries from people wanting to make a full declaration to HMRC and to avoid the harsher penalties from 1 October 2018. If you would like to discuss making a declaration under the Worldwide Disclosure Facility, please contact us on 0207 998 1834.

 

Tax Appeal lost for undeclared sales

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Aziz [2018] TC 06405

The First Tier Tribunal has decided to uphold the income tax, national insurance and VAT assessments including penalties as issued by HMRC. The appeal was filed by the appellant following HMRC’s investigation including covert/ undercover inspections. HMRC’s covert tests revealed that the appellant had not been fully declaring his sales. Initially HMRC had set the penalties very high for deliberate behaviour. Following prolonged negotiations by the representatives, HMRC agreed to reduce the penalties to 19.8% under careless behaviour.