HELP! Under Investigation from HMRC

chrismac1

On travelling costs, the good news is that HMRC aggressively tarrgetted contractors working on the 2012 Olympics village and they lost the key cases. Bear in mind these guys were travelling from distance - in one case the Wirral - and hence claiming bed and breakfast, evening meals, trains and so on.

The key point is that the tribunals held there were some necessary activities taking place at the "base of operations" which could not be done from the client sites. These activities were things like preparing quotes, raising sales invoices and other commercial activity.

EVERY single construction industy sub-contractor client on my books is deeming his home to be his place of operations, this is standard practice. So I would be sruprised if HMRC attack you on this expense area, and would be willing to go the full 12 rounds on this issue with them if necessary.

PlutoinCapricorn

It may well be that it was the itemised expenses that triggered this enquiry, but surely this is a point in your favour as they can see that you reported the different categories individually.

purdyoaten

As chrismac says, this is the major drawback of DIY returns. Some post here to state how easy it was to complete the return in, for example, ten minutes but take no account of the pitfalls now befalling the op. Similarly, the expense of an accountant / tax advisor always is at the top of the list when it comes to reducing expenses - the one that potentially saves the most money!

Chrismas frequently advocates taking out an insurance policy against the cost of investigations and this highlights the wisdom of this.

The op is now has the same dilemma as when completing the return in the first place - choose a tax advisor or DIY. This is not a simple aspect enquiry but a full investigation. Is it better to go it alone or engage the services of someone who will be as experienced as the tax inspector who is carrying out the investigation? That is the decision.

Chris_Peters70

chrismac1 wrote: »

On travelling costs, the good news is that HMRC aggressively tarrgetted contractors working on the 2012 Olympics village and they lost the key cases. Bear in mind these guys were travelling from distance - in one case the Wirral - and hence claiming bed and breakfast, evening meals, trains and so on.

The key point is that the tribunals held there were some necessary activities taking place at the "base of operations" which could not be done from the client sites. These activities were things like preparing quotes, raising sales invoices and other commercial activity.

EVERY single construction industy sub-contractor client on my books is deeming his home to be his place of operations, this is standard practice. So I would be sruprised if HMRC attack you on this expense area, and would be willing to go the full 12 rounds on this issue with them if necessary.

Thanks again for the useful advice Chris.

Do you happen to have any link to hand for these tribunal cases? Also, do I need to demonstrate that my home is my place of operations?

Pretty much all of my work is carried out for the same contractor. Will HMRC contact them to check anything?

PlutoinCapricorn

You have reminded me of someone who came on here very worried about a call from HMRC re an investigation. It turned out that it was his supplier who was being investigated, and they just wanted to confirm a sale or something. Could it be the contractor who is the primary subject of the investigation?

PlutoinCapricorn

"I have heard on the 'grapevine' (other accountants who have had the letter re practice visit) that they were looking at subcontractor tax returns where the expenses claims exceed 25-30% of the income figure disclosed on the Return. They are fully aware that a vast majority of the expenses claimed are estimated and not supported by vouchers or business records of some sort. "
http://www.accountingweb.co.uk/anyanswers/question/hmrc-check-tax-returns-subcontractors

Chris_Peters70

PlutoinCapricorn wrote: »

You have reminded me of someone who came on here very worried about a call from HMRC re an investigation. It turned out that it was his supplier who was being investigated, and they just wanted to confirm a sale or something. Could it be the contractor who is the primary subject of the investigation?

No definitely not. It is an enquiry under section 9a of Taxes Management Act (see original post).

PlutoinCapricorn

I am just an ordinary sole trader: CIS is something special. Apparently just as HMRC are reported to be cracking down on 'false self employment', they may be looking at CIS too to see whether the sub-contractors should be on the payroll. I wonder whether that is what they want to know about you.

http://www.theguardian.com/business/2012/dec/03/self-employment-switch-saves-construction-industry-millions-tax

Castle

Chris_Peters70 wrote: »

No definitely not. It is an enquiry under section 9a of Taxes Management Act (see original post).

It's possible that your contractor had been investigated and then HMRC have gone away and looked at all of the subcontractors who had worked for them. They may be comparing the expenses claimed by each of the subcontractors, especially if you are working almost "full time" for the same contractor.

PlutoinCapricorn

I don't really understand CIS - it is very confusing - but it seems that some sub-contractors claim for expenses that their contractor has already reimbursed.

Googling various permutations of keywords is very useful. Someone said that the OP should not have done his return himself; he has been doing this because an accountant messed it up earlier. I found a sub-contractor who used an accountant and this was what triggered an investigation: they estimated the expenses.

There is also a big danger of unscrupulous companies that promise to get big CIS refunds - for a price.

https://www.taxrebateservices.co.uk/category/cis/