Scream Wholesale Ltd [2018] TC 06398
The First Tier Tribunal has decided that the appellant’s appeal should be “struck out” as they failed to comply with the Tribunal’s Directions. The appeal for striking out are usually made by HMRC’s litigation team when the appellant fails to comply with directions. In our view, these mistakes usually made by inexperienced representatives can be very costly to the tax payer.
A businesswoman, Claire Gould, resident of Houghton Le Spring has been jailed for VAT fraud. Ms. Gould used fake invoices to claim back VAT of £175,000 from HMRC. Her fraud was uncovered after an investigation by HMRC’s specialist team. She has received a confiscation order of £80,509 but has only paid back £7,000. If she fails to pay the confiscation order within two months, she will face another eighteen months in prison. Read more..
1- John Hamill, resident of Stwarton, Ayrshire trading as a recycling consultant has been jailed for tax fraud after steeling more than £309,000 in tax. Mr. Hamil worked as the owner of GH Consulting from his home. He made profits of £1.3m from 2006 to 2014 but did not register or pay his tax due. On 3 April 2018, at Kilmarnock Sheriff Court, Mr. Hamil pleaded guilty to Income Tax fraud. He was sentenced to twenty one months in prison. Read more..
This client came to us on recommendation from another firm of accountants in London. The client had substantial undeclared income for several years and was intending to fully declare to HMRC but was quite nervous about the idea and repercussions from HMRC. We made a disclosure using the Contractual Disclosure Facility or Code of Practice 9 route offered by HMRC. Through this we were able to ensure that our client is not prosecuted and also the penalties are kept to a minimal level. The client was very pleased with the outcome.
Our analysis: We have had a number of clients that have undeclared income and want to come forward. The conventional approach is to file tax returns for a number of years which can lead to immediate penalty charges and a significant chance of a formal tax investigation being opened with possible prosecution by HMRC if the case is significant. This can be costly, stressful and time consuming. A disclosure through the Contractual Disclosure Facility or Code of Practice 9 allows one to make a more cost effective and efficient disclosure providing a level of immunity from prosecution. This is a specialized and technical area and firms with experience of these types of disclosures should be used.
This case was referred to us from another accounting firm in London. The case related to a retail company and there was a dispute on some large items that had been claimed in the tax return. The HMRC inspector disagreed with the deductions and had disallowed these resulting in a significant tax liability together with large penalties. The case had been going on for over 3 years before our firm was appointed. Our tax investigation specialists met with the HMRC officers involved and after long discussions and negotiations agreed that full relief will be allowed for the expenses claimed. The relief was split into revenue and capital portions which meant that the client will get relief in two stages compared to no relief before the case came to us. The final settlement meant that the tax demand from HMRC was significantly reduced and the penalties were cancelled. Our firm is grateful to the HMRC officers involved for their cooperation and understanding our client’s position.
Our analysis: This case came to us after roughly three years of the initial enquiry letter. During this period, various areas of dispute arose and matters kept getting worse not mentioning the professional costs that were incurred. After we took on the case, it took us a few weeks to resolve matters and close the case. Our advice has always been to appoint a specialist as early as possible to reach a quick and pain free resolution.
In the past months and years we have been contacted by numerous new clients and accounting firms in relation to advice and representation on Code of Practice 8 or Code of Practice 9 (Contractual Disclotax investigations. COP 8 and COP 9 tax investigations by HMRC are very complex in nature and should be referred to a specialist immediately. The initial and final disclosure reports including supporting evidence furnished to HMRC are sensitive and should be prepared and submitted by experienced professionals. If HMRC discover any discrepancies, these investigations can turn very ugly and can have very serious consequences including custodial sentences and imprisonment. the COP 8 investigation can be upgraded to COP 9.
Our firm’s tax investigation specialists have years of experience in tax investigations including COP 8, COP 9, Contractual Disclosure Facility (CDF), Proceeds of Crime (POCA) and Money Laundering cases (where HMRC are investigation tax fraud or tax evasion) and can offer invaluable support and representation. Please contact us if you would like to discuss a case.
HMRC have issued a stern warning to UK taxpayers who have not declared any offshore income, assets or bank accounts. Currently there are disclosure options available under the Worldwide Disclosure Facility (WDF). This facility will finish on 30 September 2018 and after this the new harsher rules will apply. HMRC has published proposals to allow more time to investigate and prosecute where taxpayers have not declared the right amount of offshore income and paid the right tax.
We have made disclosures for a large number of clients with offshore accounts and assets and achieved very favourable results. If you would like to discuss the impact of the new rules, please do not hesitate to contact us.
This case came to us from an accounting firm in London. After the client received the tax investigation letter from HMRC, their accountants absconded and closed their offices and stopped taking any calls or letters! The client was ultimately referred to our firm. There had been errors in the VAT returns and the accounts with respect to the level of income declared. The HMRC enquiry comprised VAT, corporation tax and self assessment for the director. In total HMRC were seeking over £350k. We spoke to our client in detail in relation to the level of business and activities including the sales trends. Our client accepted that they had been misled by their accountants and as a result had paid less tax. However, the level of sales estimated by HMRC were substantially higher than the actual sales over the previous several years. This meant that the tax assessments raised by HMRC were much higher than the actual liability. Our team of tax investigation specialists referred the case to Alternate Dispute Resolution (ADR) to present our client’s case prior to going to the First Tier Tax Tribunal. After seven hours of discussions and negotiations in the ADR meeting with HMRC and ADR facilitators, we finally reached a settlement of roughly 25% of the original amount being assessed. Our client was happy to accept this figure and HMRC also accepted that the quantum of sales omissions were not as high as initially estimated. A written agreement was reached at the end of the meeting and both parties walked out happily. Our firm is grateful to the HMRC officers (including senior officials) involved in the ADR meeting for their level of cooperation, understanding our client’s position and keeping an open mind in relation to the facts.
Our analysis: This was a rare case where an accountant had absconded after their client received a tax investigation letter. The level of irregularities conducted by the accountant as described by the client were disturbing and shocking both for our firm and HMRC. Our firm tried on many occasions to contact the previous accountants but their office was closed. We have come across a number of situations where a tax payer has got into significant problems due to negligence by their accountants. It is sad to see that a number of businesses do not carry out due diligence before appointing an accountant and are mainly focused on the lowest possible fee in the market where quality of work is significantly compromised. The same people then pay a lot more in taxes, penalties and professional fees after being investigated by HMRC.
The Upper Tribunal has decided in favour of HMRC in relation to the multi-million pound tax avoidance scheme promoted by Cyclops Electronics and Graceland Fixing and used by over a hundred other businesses. In summary the businesses involved in the scheme used loan notes to pay bonuses to company directors with a view to avoid paying tax and National Insurance. A number of companies were created to issue the loan notes with special condition and were designed to match the bonuses. The scheme was designed to make use of loopholes in the legislation but these have now been closed. This win by HMRC is expected to collect over £55 million in tax. This was another example of heavily marketed tax avoidance schemes (backed by counsel opinion) that has failed. We have written several times previously about how one should avoid entering into these artificial schemes that are only likely to fail in courts. If you were a victim to this scheme and would like professional help in resolving your position with HMRC, please contact us and we will be happy to help.
After our successful seminar on 28 February 2018 at Doubletree Hilton, Holborn, London, we have been requested by a large number of candidates to host regular webinars in relation to tax investigations and various technical tax issues. Our first webinar will be held on 28 March 2018 at 1pm and will cover detailed insight into “Tax investigations and how to get these closed effectively”. If you would like to attend the webinar, please register your interest at seminar@churchilltax.co.uk. The webinar will count towards your CPD if this is relevant to you.
