Sole trader - BR due to VAT help

Taxinfo_2

Apologies for the extremely illegible style of all replies they are more rants than decent answers. I am quite fed up of them as its been dragging on for over 18 months now! just want to get on with my life!

Taxinfo_2

laurel7172 wrote: »

When you refer to a partner-do you mean life partner? Is she a partner in the business? ( I know you said you were a sole trader, as opposed to a ltd co, but it's VERY important to be clear about this).

Laurel
it's a civil partnership, business is all in my name.

Thanks

antonic

Thanks for the replies - please see my quotes in RED

Taxinfo wrote: »

1) Have you ever failed to file your VAT returns ?

2) Is the debt based on an Officers Assessment BECAUSE you failed to file the returns ? (If it is then if you were to file the returns now AND they are less then the value of the Assessment, they can be rejected).

3) Has the Assessment been raised because you failed to register for VAT when you started trading over the limits and has been raised by one of the Hidden Economy Teams ?

4) Did this come to light because your Self Assessment returns were investigated ?

5) You can appeal the Assessment to the Officer who raised it and if not satisfied (as JasonLVC has said) ask for an independent review.

6) If your not happy with the independent review you can then ask to take it to an independent tribunal

7) If you take it to Tribunal you can ask for payment to be withheld on grounds of hardship

8) You need to bear in mind, that in law an Assessment can be raised on the Officers best judgement


Ok trying to play catchup to answer all these questions

1) never failed to file tax returns, I was vat registered prior to the credit crutch, however times have changed and buisness has reallytaken a hit, since my turnover is < than the threshold I deregistered. I still complete my self assessments via accountant
OK, are you sure your accountant got the returns right ? - remember YOUR liable for the debt NOT your accountant.

2) assessment came about via random visit - OK this was just a visit to check your books ? - has the assessment ACTUALLY been raised yet ? , because before they do they have to issue you with a 21 day letter advising of the problems they have found

3) assessments been raised surly because they want to claw some cash back regardless? - No, the Officer believes you have incorrectly accounted for VAT

4) as per 2)

5 -8) I really appreciate the idea but as explained in earlier posts I truly believe the tribunal path is a dead end with little success rate <20% from speaking to people and Internet research. Trying to defend yourself is never going to be easy. They are trying to find a needle in a haystack and they have found plenty to my surprise! It's their rules and their game

thanks for your response

Taxinfo_2

antonic wrote: »

Thanks for the replies - please see my quotes in RED

Antonic

Thanks for your questions, most of ur queries have already been addressed in previous posts.

antonic

OK,

I will drop out now as you believe I cant help you any further.

Mouse1812

First line of defence:

HMRC got thumped in the Farthings Steakhouse case

"In reality, Inspectors often make life unnecessarily difficult for the taxpayer by pursuing arguments in the full knowledge that the taxpayer does not have endless resources, or assuming that basic records are inadequate and that this justifies inflating the gross profit. In Farthings Steakhouse, the Inspector argued that the reported gross profit margin was too low and a lack of prime accounting records meant that significant adjustments were justified. In fact, although the prime records were basic, they had not been 'broken', were adequate for the small business concerned and proper accounts had been prepared from them."

Have HMRC "broken" your records? that is have they proved that on a specific date sales of £x were omitted.


Second line of defence:

Does your lifestyle match your declared income? - that is can you show where the money came from to pay for everything: rent, food, holidays, cars, hobbies etc.?


Ask your accountant about the Farthings Steakhouse case, if he/she looks blank / does not know about it get another accountant, this is simple stuff if you are being 100% honest.

Taxinfo_2

Mouse1812 wrote: »

First line of defence:

HMRC got thumped in the

"In reality, Inspectors often make life unnecessarily difficult for the taxpayer by pursuing arguments in the full knowledge that the taxpayer does not have endless resources, or assuming that basic records are inadequate and that this justifies inflating the gross profit. In Farthings Steakhouse, the Inspector argued that the reported gross profit margin was too low and a lack of prime accounting records meant that significant adjustments were justified. In fact, although the prime records were basic, they had not been 'broken', were adequate for the small business concerned and proper accounts had been prepared from them."

Have HMRC "broken" your records? that is have they proved that on a specific date sales of £x were omitted.


Second line of defence:

Does your lifestyle match your declared income? - that is can you show where the money came from to pay for everything: rent, food, holidays, cars, hobbies etc.?


Ask your accountant about the Farthings Steakhouse case, if he/she looks blank / does not know about it get another accountant, this is simple stuff if you are being 100% honest.

Thanks for the reference I will try this out. I don't think they have broken any records they just wrote a buisness plan and tries to match it with what I do.
I live on the breadline, I don't even turn the heating on these days just to reduce energy bills as much as possible, I own nothing except an old car albeit I don't have dept so to speak.

Cheers

Tiddlywinks

So - HMRC believes your turnover from 2009 exceeded the VAT registration limit and has issued an assessment of monies due.

You say you have kept 'true' accounts - what is your declared turnover for the period since 2009 compared with HMRC's assessed turnover?

This isn't a conspiracy - if your records clearly reflect your purchases, sales, drawings etc and your bank account reflects these credits and debits then you wouldn't be in this position... what are you not telling us?

Mouse1812

Tiddlywinks wrote: »

... if your records clearly reflect your purchases, sales, drawings etc and your bank account reflects these credits and debits then you wouldn't be in this position... what are you not telling us?

Not True - we have been told HMRC have come to this conclusion not because of any discrepancies in the accounting records but because they think the business should be doing better. It is wholly unreasonable to impose a theoretical business model as economic fact on a taxpayers profits without any supporting evidence.

That’s the kind of unreasonable attitude HMRC adopt and it is one that they were roundly criticised for in the case of Farthings Steakhouse.

“The Inland Revenue have failed to find any unaccounted for bankings or unaccounted for expenditure or any unaccounted for capital accretions. Their efforts have thus been devoted to the preparation of several business economic exercises, several of which have been shown to be inaccurate or just plain wrong. In any event in my judgment business economic exercises alone can rarely if ever justify the sort of attack mounted by the Inland Revenue.”

and

“...the taxpayers are not on trial for inefficiency in their business. Mr Scott may not be the best of managers and he may be unduly pernickety as to his requirements in relation to steaks, but that is no crime.”

“In my judgment due care and diligence has not been exercised by the Inland Revenue”

“I find that the Inland Revenue has acted wholly unreasonably in connection with this hearing, having shown bad faith”

The difficulty is the OP has a cash business, sales and purchases are cash transactions. HMRC are claiming that there was more cash because a business economics model says so. Well the suppression of cash sales could be one answer, but it’s not the only possibility, poor business management could be another. Leaping to conclusions is both dangerous and wrong. They were wrong with Farthings Steakhouse and they could be wrong with the OP.

The OP may or may not be telling us everything, we will never know, but from what he has told us his complaint fits the complaint that Farthings Steakhouse had.

He came here for advice, not grief, and on the basis of what he said I hope I have pointed him in the right direction.

Taxinfo_2

Mouse1812 wrote: »

Not True - we have been told HMRC have come to this conclusion not because of any discrepancies in the accounting records but because they think the business should be doing better. It is wholly unreasonable to impose a theoretical business model as economic fact on a taxpayers profits without any supporting evidence.

That’s the kind of unreasonable attitude HMRC adopt and it is one that they were roundly criticised for in the case of Farthings Steakhouse.

“The Inland Revenue have failed to find any unaccounted for bankings or unaccounted for expenditure or any unaccounted for capital accretions. Their efforts have thus been devoted to the preparation of several business economic exercises, several of which have been shown to be inaccurate or just plain wrong. In any event in my judgment business economic exercises alone can rarely if ever justify the sort of attack mounted by the Inland Revenue.”

and

“...the taxpayers are not on trial for inefficiency in their business. Mr Scott may not be the best of managers and he may be unduly pernickety as to his requirements in relation to steaks, but that is no crime.”

“In my judgment due care and diligence has not been exercised by the Inland Revenue”

“I find that the Inland Revenue has acted wholly unreasonably in connection with this hearing, having shown bad faith”

The difficulty is the OP has a cash business, sales and purchases are cash transactions. HMRC are claiming that there was more cash because a business economics model says so. Well the suppression of cash sales could be one answer, but it’s not the only possibility, poor business management could be another. Leaping to conclusions is both dangerous and wrong. They were wrong with Farthings Steakhouse and they could be wrong with the OP.

The OP may or may not be telling us everything, we will never know, but from what he has told us his complaint fits the complaint that Farthings Steakhouse had.

He came here for advice, not grief, and on the basis of what he said I hope I have pointed him in the right direction.

Thank you mouse, there is things I can't go into details on here for obvious reasons, the case is similar to the steakhouse case.
The sheets are balanced, however based on the vat mans economic business model it shows we should be waaaay better off, trust me I wish it was true, even with the tax bill the amount I would be better off!

Thanks to everyone who's contributed!