HELP! Under Investigation from HMRC

chrismac1

Purdyoaten is correct. As per my previous posts, you can no longer rely on enquiries being conducted by experienced and suitably qualified inspectors. In fact my last 2 enquiries appear to have been conducted by people who did not even know the tax law in the area they were conducting the enquiry in!

Given that, problems with documentation are a problem. Because you are dealing in essence with a box-ticker, and you are not ticking the boxes. It is only at higher levels of HMRC that you have any chance of finding someone who has a broader view of, for example, employment status tax cases and appreciates that it is how the contract operates and not the bits of paper which ultimately determines this.

I'll go further. Even at HMRC higher levels you often just find box-tickers. Some of the Tribunal cases HMRC have brought in this area have been a complete joke, they had no chance of winning. Presumably senior management review these cases before they file the Tribunal papers, if so it is clear they reviewed them on the box-ticking basis with utter disregard for the true nature of the commercial relationships in the cases.

So my advice to the OP is to make every effort on the box-ticking front if you want to keep down the costs of this matter.

Chris_Peters70

chrismac1 wrote: »

Purdyoaten is correct. As per my previous posts, you can no longer rely on enquiries being conducted by experienced and suitably qualified inspectors. In fact my last 2 enquiries appear to have been conducted by people who did not even know the tax law in the area they were conducting the enquiry in!

Given that, problems with documentation are a problem. Because you are dealing in essence with a box-ticker, and you are not ticking the boxes. It is only at higher levels of HMRC that you have any chance of finding someone who has a broader view of, for example, employment status tax cases and appreciates that it is how the contract operates and not the bits of paper which ultimately determines this.

I'll go further. Even at HMRC higher levels you often just find box-tickers. Some of the Tribunal cases HMRC have brought in this area have been a complete joke, they had no chance of winning. Presumably senior management review these cases before they file the Tribunal papers, if so it is clear they reviewed them on the box-ticking basis with utter disregard for the true nature of the commercial relationships in the cases.

So my advice to the OP is to make every effort on the box-ticking front if you want to keep down the costs of this matter.

Fair enough, apologies to Purdyoaten. It's scary to know that the inspectors have so little knowledge.

I have read through various stuff on the internet regarding the possibility that HMRC will eventually call me in for a meeting. I understand that I am not legally obliged to attend one with them but I am assuming if I don't, the level of penalties I may have to pay will be kept on the higher side. What I mean is, will HMRC see my refusal to attend a meeting as un-cooperative.

I'm just trying to weigh it all up at the moment but I am definitely leaning towards employing a tax investigation specialist as the likelihood is they will want to trawl back previous years too.

As previously mentioned, I have two meetings set up with accountants this week and I am likely to pick the one I feel the most reassurance with (not that I should probably have any). Both accountants have told me to bring in as much information as possible, statements, bills (everything HMRC has requested). They have also asked me to bring in a passport and recent utility bill. At what stage will I be charged by the accountants? Do you think I will be billed immediately for the first meeting?

Thanks

chrismac1

You should not be billed at the first meeting. In fact transparency of fees shouuld be one of the key factors in how you decide who to select. In these situations I advise only well-briefed clients to agree to a meeting and ONLY with me present. A well-run meeting (and by that I mean that I take charge of it firmly but politely in the first 5 minutes and keep the agenda on my terms, whilst developing a positive relationship with the HMRC person) will help enormously to resolve this issue quickly and at minimal cost.

A poorly run meeting will have exactly the opposite effect. The reason you need representation is that HMRC staff will take fliers in these meetings, even if there is representation. For example in one with HMRC Debt Management the HMRC person threatened my client that she would end up losing her house. I pointed out that she owned the house, and the VAT debt was with her limited company and invited the HMRC person to agree therefore that there was no way my client could lose her house. Through gritted teeth the HMRC person then agreed this was true.

If this is the stuff they will come up with when they know an accountant is in the room, what sort of threats and punts do they try on when they know it's just a self-representing victim they have in their claws?

purdyoaten

chrismac1 wrote: »

If this is the stuff they will come up with when they know an accountant is in the room, what sort of threats and punts do they try on when they know it's just a self-representing victim they have in their claws?

You make a very good point here, perhaps inadvertently. HMRC adopt an entirely different approach when faced by a reputable tax specialist/ accountant, although they shouldn't. Similarly with submissions.

They are less likely to be challenged by a taxpayer acting on his/her own and act accordingly. Ask yourself chrismac - would HMRC rather you were in the room and involved or not?

Chris_Peters70

I see your points. So would the taxpayer be required to answer the HMRC person or can all answers be left to your accountant?

Do you think I need to inform my contractor of this? Is it likely HMRC to contact them in the future to verify particular details?

purdyoaten

Chris_Peters70 wrote: »

I see your points. So would the taxpayer be required to answer the HMRC person or can all answers be left to your accountant?

Do you think I need to inform my contractor of this? Is it likely HMRC to contact them in the future to verify particular details?

Once an agent is authorised you should have no contact whatsoever (you may be copied into some correspondence ) with HMRC until the face to face meeting - if that ever happens! You liaise with your agent and he/she with HMRC. It will cost but a lot of the stress will be removed hopefully. Just don't expect things to happen too quickly!

And consider insurance - chrismac has mentioned some providers in the past and may do so again.

Chris_Peters70

purdyoaten wrote: »

Once an agent is authorised you should have no contact whatsoever (you may be copied into some correspondence ) with HMRC until the face to face meeting - if that ever happens! You liaise with your agent and he/she with HMRC. It will cost but a lot of the stress will be removed hopefully. Just don't expect things to happen too quickly!

And consider insurance - chrismac has mentioned some providers in the past and may do so again.

Thanks again!

I finally initiated contact with the inspector for the first time by telephone. I asked for an extension of time (1 month) to prepare the information and also to seek advice. She actually seemed quite reasonable over the phone and agreed to give me more time. She did ask whether "I'd definitely send it" though to which I replied "100%". I do feel I bit better now that I have spoken to her. I'm perfectly aware though that her job is to claim back as much revenue as possible.

Chris_Peters70

So now I've met with two accountants. One is a small firm and their director sat with me for nearly an hour and a half going through things. He seemed experienced but I didn't get the feel he was much of a tax investigation specialist. The biggest surprise was him quoting me "a couple of hundred pounds plus VAT"!
The second accountant was from a much larger firm, their rate is £150 per hour. I really didn't get a great feeling from either.
The main issue I've discovered is that I have around £5,000 of expenses that are questionable. That equates to around £1,000 of lost tax, applied to 6 years plus penalties and interest, could be around 7k-10k.

Can anyone point me in the direction of a tax investigation specialist, I really want someone that has experience with these matters. I did find a guy on the internet, Martyn F Arthur, he seems very experienced although a little on the pricey side. It's very hard to weight it all up..... cost of accountants vs possible HMRC payback...

Any advice would be appreciated.

SeduLOUs

Sorry Chris. Don't know what to advise but didn't want to read and run.

I don't know how much use a 'tax investigation specialist' would be - if you've got it wrong you will need to pay and there's not a lot of room to argue about it.

A suitable accountant will know what you can and can't claim, and will also know what the grey areas are and how likely you are to get away with specific examples in light of HMRC breathing down your neck.

The first one spending such a long time with you does give a bit of confidence - at least from this 'chat' you have a much better idea of what you could be facing (although I'm not sure if that helps!) If you don't get a good feeling about either though, it is probably worth speaking to a few more people to see if they are giving you the same general idea and until you get one you feel better about.

It's a bit like mechanics. You know there are plenty who are great and plenty who just want to rip you off, but without a specific recommendation you eventually just have to take a leap of faith with one and hope for the best.

I wish you the best of luck. Even if the bill ends up big I would hope that HMRC will be lenient and see that this was naive of you rather than a deliberate attempt to avoid tax - this distinction should help to keep any penalties much lower and hopefully allow you a decent time to repay.

Please do keep us up to date.

Dr._Shoe

I'm not an expert by any means but I have done a spell as self employed.

1. Unless you commute elsewhere and then travel to your clients from there, your home is your "place of operation" automatically- or they will certainly allow it.

2. If your home is the only place where you do your paperwork then you can claim a great deal more than £4 per week. If you have a room (or an outbuilding) dedicated as an office you can also claim for its upkeep.

3. HMRC have a very good idea how much the average tradesman in your particular industry can expect to earn and how much they usually pay out for tools and other expenses.

4. If you earnt £60K and paid £12K in tax I would say that you have paid a fair amount of tax. Using the tax calculator it comes out to £13,403 for an employed person. I can't see HMRC having a major issue, they're only interested in people earning far more but paying far less tax than you are. Don't worry about the scare stories, I've always found HMRC cooperative and helpful but then I'm a girl my few contacts with HMRC have been with men!

I'm pretty sure you'll be OK (but don't take my word for it please!) they've probably just picked you out at random for an audit.

Things you might have a problem with:

• Buying secondhand tools but claiming them as new on expenses.

• Claiming for fuel to drive to your base of operations.

• Claiming fuel expenses on SDP travel.