HELP! Under Investigation from HMRC

chrismac1

CIS is perfectly simple to understand once you understand the basic concept : HMRC view all constuction industry folk as potential rogues and hence over-tax them up front on their income.

With regard to the reason for this enquiry, in my view the 80% shot is the following:

1. This is the sector with the highest level of enquiries of any sector.
2. This is a DIY tax return person, viewed - for good reason in my view in general - as more likely to be paying too little tax.
3. Certain aspects of the accounts, and the total expense ratio, look wrong.

In terms of the tax cases regarding Olympics contractors who were found to be legitimately claiming travel costs to London, accommodation in London and evening meals:

Kenyon v CRC 2011 Mellor v CRC 2011

Tebheag

Unfortunately this is going to be the case for a lot of people over the next few years as more people are going to be investigated.

As for your base of operations if this the same address that you use for invoicing ? you do not pay rent on any other location ? Then you will be fine just have to put your hands up and declare your mistake on use of home perhaps show your workings so they know it was not done on purpose.
oh and I find making hot drinks and couple of cakes or biscuits on hand can help Normally they are not bothered by receipts for things under £25.00 so depends how much you paid for things at car boots.

Chris_Peters70

chrismac1 wrote: »

CIS is perfectly simple to understand once you understand the basic concept : HMRC view all constuction industry folk as potential rogues and hence over-tax them up front on their income.

With regard to the reason for this enquiry, in my view the 80% shot is the following:

1. This is the sector with the highest level of enquiries of any sector.
2. This is a DIY tax return person, viewed - for good reason in my view in general - as more likely to be paying too little tax.
3. Certain aspects of the accounts, and the total expense ratio, look wrong.

In terms of the tax cases regarding Olympics contractors who were found to be legitimately claiming travel costs to London, accommodation in London and evening meals:

Kenyon v CRC 2011 Mellor v CRC 2011

Thanks again for your continued advice on this matter, I'm very grateful.

PlutoinCapricorn

Chrismac has been helping CIS people for a long time e.g.

https://forums.moneysavingexpert.com/discussion/3128138

chrismac1

I think it is very unlikely that more people are going to be investigated over the next 5 years than over the last 5:

1. HMRC is not one of the protected spending departments.
2. All major parties have big gaps in their projections which will need to be plugged by big cuts in non-protected departments.
3. HMRC is very thinly stretched and the average quality of its staff has declined significantly in the past 10 years.
4. Investigations - unless the victim just tosses his or her hand in early doors - require knowledgeable and experienced staff, not telesales monkeys. In other words, exactly the sorts of people HMRC has let go in their thousands.

So just in practical terms in my view we are more likely to see fewer, not more, enquiries. Any politician who says otherwise is living in a dream world.

PlutoinCapricorn

Just for you Chrismac:

"A former HMRC employee has been jailed for three years for £358,000 Construction Industry Scheme (CIS) fraud.

Malcolm MacLean, a former Inland Revenue trainee tax inspector, was also the director of Shildon accountancy firm MacLean Fisher Tait Accounting & Taxation. He was arrested in May 2011 along with other directors Aiden Tait, and David Fisher, for the fraud.

An HMRC investigation showed that the directors had falsified documents and manipulated client accounts to cover up CIS and tax fraud. "

http://www.accountingweb.co.uk/article/ex-hmrc-employee-jailed-cis-fraud/539491

Chris_Peters70

Tebheag wrote: »

Unfortunately this is going to be the case for a lot of people over the next few years as more people are going to be investigated.

As for your base of operations if this the same address that you use for invoicing ? you do not pay rent on any other location ? Then you will be fine just have to put your hands up and declare your mistake on use of home perhaps show your workings so they know it was not done on purpose.
oh and I find making hot drinks and couple of cakes or biscuits on hand can help Normally they are not bothered by receipts for things under £25.00 so depends how much you paid for things at car boots.

I do not raise formal invoices. I have agreed rates with my contractor as to whether I proceed on a day rate or whether I take jobs on price. All of my payslips show that I have been paid for "measured work".

purdyoaten

Chris_Peters70 wrote: »

I do not raise formal invoices. I have agreed rates with my contractor as to whether I proceed on a day rate or whether I take jobs on price. All of my payslips show that I have been paid for "measured work".

I hope that you do not use the word 'payslips' when negotiating with HMRC. The last road that you want to go down is the latter questioning your employment status - both for you and the contractor!

Chris_Peters70

purdyoaten wrote: »

I hope that you do not use the word 'payslips' when negotiating with HMRC. The last road that you want to go down is the latter questioning your employment status - both for you and the contractor!

Absurd. Whether I refer to a piece of paper with my payment/tax details as a "payslip" or a "statement" or anything else for that matter, will not decide the nature of my engagement with my contractor which by itself will determine my employment status.

purdyoaten

Chris_Peters70 wrote: »

Absurd. Whether I refer to a piece of paper with my payment/tax details as a "payslip" or a "statement" or anything else for that matter, will not decide the nature of my engagement with my contractor which by itself will determine my employment status.

Fair enough - I guess it is your decision whether to accept or reject any advice. HMRC, as others have said, have been attacking the employment status of subcontractors for quite a few years and, for me, the less ammunition they have the better.

I dealt with HMRC investigations for around twenty years. Previous experience of dealing with a full investigation is invaluable - you can bet your life that the guy on the other side will be! That is why I suggested previously not to 'go it alone'. Again, that is your choice!

A tax specialist will be better placed, not only to challenge HMRC assumptions when determining final liability (if any) but to mitigate penalties. HMRC are notoriously slow where investigations are concerned - it was not unusual to expect 9-12 months duration and that, in itself, is a major contributor towards what is already a stressful situation.