|Don't Let them Bully You
- They are not always right
|Why Use Me?
Well I know what some of them get up to
Continued from previous column>>
They need to discover that profits or income
have been understated and so far all they
have alleged is that your client had an
offshore bank account or there is other
information available to them. This in itself
probably only leads to a likelihood that Case V
interest (or another source) may have been
understated (if it needed to be disclosed) . If
so, all you need to do is disclose that the
source has in fact been omitted. This does
not give them the right to see all and every
entry on a bank statement. If therefore for
example you were to provide a statement from
the financial institution that interest of the
following amounts to the 5th April each year
(from the date the account was opened) were
earned and omitted this would satisfy and
comply with all that might be "reasonably"
required to resolve the issue.
OF COURSE you may well reasonably take
the line that you should leave them to take
whatever discovery course they think fit
and just not respond - this is not generally
recommended but is of course an option if
they have got it horribly wrong as can happen.
The only recourse would be for them to make
whatever discovery assessments they could to
the best of their judgement and ability and
then you could appeal and take matters
forward as considered appropriately in the
best interests of your client.
You would then have them in the situation of
having to self scrutinise their actions and
realise that you are not going to be bullied
into putting your PI policy at risk. Do otherwise
and you could be criticised for handing over
documents and giving information that was not
Remember that "discovery" only
presently enables the HMRC to make
assessments it does not give them an
automatic right to see documents that might
enable them to make the discovery that
income has been under-assessed and tax
unpaid. The position changed however from
6th April 2009 when the new Schedule 36
provisions enabled them to search out
discovery by reasonable requests for
documents and information. You might want to
force them to put their thinking caps on - and
ingenuity to the test - and require the making
of the assessments. Appeals might result in
your client also discovering what they have
got. OK I know this is a remote possibility -
they have a habit of assessing "other income"
- but you never know and a little bit of out of
the box thinking sometimes helps.
Into the bargain the ground rules are shifting a
bit with Tribunals not agreeing with everything
HMRC say is a valid discovery. Use their own
secrets and rules against them if they are
trying to argue they have discovered you have
done wrong and have unpaid tax. They are
not always correct. They lost over £450K
recently from failing to do things correctly.
If of course your client has been
"careless" and the offshore bank accounts
held not only the untaxed interest but also
taxable - but untaxed - profits kept from the
clutches of the exchequer then of course you
also require to both advise the client not only
about the statutory position - as laid out above
in relation to the requests for documents etc –
BUT more pertinently the advisability of
making an early and full disclosure of
irregularities to HMRC along with a payment
on account of unpaid duties to keep the
possible penalties and interest bill down.
Reluctance to take a reasonable line in this
scenario may well harden attitudes and in the
end be counter productive to getting your
client the best and quickest deal that could be
While this article has been inspired by a
loosely and presumptuously worded letter
from one of the HMRC staff it did make me
realise that this was in fact the second such
request I had seen in a matter of weeks.
Equally it smacked in the same letter of an
accounts enquiry being generated just
because they had information relating to
earlier years. What suggested this? Well it
was the request for a full analysis of the £60
General expenses and just over £1,000
Travelling and subsistence and a full A4 sheet
of requests about balancing and estimated
figures where the taxpayer had included on
the return an explanation that accounts had
not been prepared. A possible failure of the
Inspector to actually look at the tax return
submitted and best practice required them to
do this before opening an enquiry
We should not encourage HMRC to cut
the corners and allow them to bully us
into giving them something that the Acts
did not envisage.
Conversely of course remember that in
addition to the normal enquiry avenue they
can have requests for information made
under their formal Schedule 36 powers.
You do not really want to be forcing them
down those routes as they can be
expensive to undo should it all go
horribly wrong or you don’t realise that
you cannot “appeal” such notices without
the extremely expensive judicial review
route if their actions are seen as
It might also harden attitudes and make an
otherwise acceptable explanation of non
taxable receipts take on a full taxable mantle
(in the Inspector's eyes).
Time Limits - Remember that if HMRC are
asking for 6 years records or 6 years
statements they must be asserting that
you/your client has been at the least careless
(with Failure to Notify or deliberate conduct
meriting 20 years). If you just give them the 6
years asked for then you are effectively
accepting carelessness conduct by your client
and is this appropriate? Get advice from Bill if
you are in any doubts.
This article hopefully will prod your thoughts
when the next "we have information" letter
lands on your desk.
If you find that you need a specialist tax
investigation adviser please feel free to
contact Bill Stevenson on 07751 720507
who will be pleased to get involved to
whatever extent is considered mutually
beneficial to the client and all concerned.
This could be from
(i) taking the whole enquiry process off your
hands - but leaving the control of the day to
day and continuing client with yourself (I am
not interested in stealing clients)
(ii) through to providing a second opinion
either orally or in writing
I am sure that HMRC Voluntary Campaigns will
to an extent be a continuing feature in years
to come but right now HMRC have an
abundance of information and do not see the
need to give incentives for overseas tax
. Of course they are able to make informal
and formal approaches "to test the water" so
we will need to be on our toes and vigilant. If
you need help contact Bill on 0775 172 0507
The above article was inspired by
happenings in 2008 but again in 2018 Bill
has now become aware of similar tactics
being employed. Time for HMRC to get a
reminder about their limitations?
Equally you can use the Feedback Form to
send me a note of your problem and what you
would want by way of advice (remember to
give your phone contact number)
|Bill Stevenson -
He can do it for you!!
|My aim is to get your
enquiry settled in the
shortest time I can
manage and for best
HMRC have got into the habit of getting information and
going on fishing trips. No I'm not trying to copy them it is
just my other hobby that the picture comes from on this
Recently the leaks from the Bahamas and Panama have
provided loads of information on different people (some to
2010 and some to 2015).
In the past HMRC have done the campaigns to allow tax
evaders tpo come forward and get the benefit of lower
penalties etc from such as :-
(a) offshore bank accounts (meaning any bank account
not based at a UK branch)
(b) medical professionals
(c) landlords and property acquirers and sellers
(d) internet traders
(e) plumbers and heating engineers
(f) others too numerous to mention here
and will eventually get round to using it.
So they are already building up a dossier on the people
who thought that they would never get caught - those who
have been secreting away their money in Panama or
Bahamas tax free..... The earlier you get in the better
chance you have of putting forward a well thought out and
credible account of your financial transactions. Wait till
they arrive on your doorstep and you are liable to be
caught on the hop and flustered into admissions that would
not otherwise be needed. You could end up getting letters
saying we have reason to believe....... and then you may
be on a damage limitation exercise. If you have any
concerns call Bill on 07751720507 for a short initial and
For professionals this is also going to be a difficult period
and even acceptance of HMRC demands could lead to
trouble not only for your client but also potentially your PI
Taxpayers reading this may also better understand the
need to have a tax adviser on your side when the HMRC
come a "knocking" or drop that fateful letter through the
There has to be a suspicion from what I have seen lately
that they are trying to cut corners and get you to provide
things that they wouldn't normally be entitled to. Watch out
for the blanket attack with requests for statements of
assets and means questionnaires before they have even
established that any thing is wrong.....
THIS SHOULD NOT BE ALLOWED!!! but has to be
handled carefully..- see Bill if you need advice or a
second opinion call 07751720507
The scenario goes with an initial letter and/or stencil
"We have information we would wish to review with your tax
liabilities ....... please provide last 6 years bank
statements.; a statement of assets and liabilities at yearly
intervals for last 6 years; statements of your expenditures
for the last 6 years...."
HMRC have information that you have had an [offshore
bank account/sold property/internet or ebay or paypal
account] at some time in the past. Please provide
copies of all your [offshore bank
account/property/internet account] accounts held at any
time in the last 6 years........."
Have you received a letter like this and what should you
do? OK don't panic if you are an accountant it will probably
be directed at one of your clients unless you have been
unwise enough to invest outside Switzerland/ Panama
/Andorra etc. or you've been selling cars on ebay
You might of course be inclined to contact the client, get
the statements and send them off to HMRC.
HOWEVER Stop there!!! Why should you?
All the letter from HMRC says is that they hold information
and are they not being a bit naughty - read on below.
The first thing that as a professional I would think that you
should do is ask your client "are there any other
"irregularities" that slipped your mind when you and I
discussed your tax returns at the year end before we
Ok if you didn't discuss the returns that is another story
and something you should earmark as good practice in the
future before submitting the next tax return online.
It is not unknown for clients to be bashful (and even
worried) when they forgot to mention the one off or new
source when they were doing the tax return and were too
frightened discuss it once it got too big to think about - or
embarass you with.
You know how it happens in real life and the simple
mistake starts in one year and leads to another and then
is just too hot to handle. How can they tell you that your
failure to discuss their returns led to them initially forgetting
and now could lead to their bankruptcy or four prison walls
- in their exaggerated imagination of course. We know the
truth that prison is extremely unlikely and even less so
when you grasp the mettle and make a full disclosure.
Remember that your client may well feel embarrassed at
having not only hidden earnings etc from the taxman but
having deceived you as well so you do need to address it
firmly but tactfully. Not always the qualities of an
experienced HMRC tax investigator but you can get in
before he/she gets hot on the trail thinking that they are
the Walter Mitty of the 21st Century chasing the present
day Al Capone.
However you do need to eke out all the little skeletons from
your client's cupboard as missing material irregularities
can take you out of your depth and end up with the client
being seen by Taxes Criminal Unit etc. when otherwise it
would not be warranted .
An initial disclosure approach to you by a client is a good
opportunity to get Bill Stevenson's expertise on board from
the start (call 07751 720507 anytime) and save you both
difficulties while ensuring that you still retain the client for
WAMS Tax Ltd and/or Bill do not do general tax returns
so there is no fear of Bill poaching your client for the
future or stealing your bread and butter. Just in the same
way that Bill wouldn't expect you to venture into things that
you do not have experience of he has no interest in
stealing or venturing into your speciality - general day to
day tax handling.
OK so the information is correct - does that mean that
there has been tax underpaid? Clearly we would have to
think out the simple explanations and the ways that could
make it all OK..
We might for example think of things like
(i) is domicile and remittances basis prior to 5th April 2008
(ii) there might be no tax lost if for example foreign tax or
UK tax was deducted at source.
It would in these circumstances be totally inappropriate to
send your clients documents that are not required in
relation to any tax liability. Equally the funds in the account
may have no taxation implications at all and have been
put in an offshore account by a non-UK domiciled person
with none ever been even used or enjoyed abroad let
alone in UK. There are also other reasons that there might
be no unpaid tax but too voluminous to list here. Just
because your client hasn't got the records or evidence
doesn't make the monies taxable...... Inspectors will of
course try and argue otherwise.
Return or no return - think about whether your client has
in fact filed a return for all years. This would change the
nature of any ultimate offence should one still exist at this
The Game is up -So we haven't managed to get our client
out of the mire yet and yes he/she/they/it should have
returned the overseas interest at least in their returns.
Would there be any tax liability if the income was
- No - we can still get our client off the hook and we don't
need to acquiesce to the HMRC demands.
- Yes - but we also need to think further and not prejudice
our client's rights and get penalties at the lowest possible
Is it 'Discovery'? - Presumably - and of course HMRC
doesn't always lay out its full basis for such god given
rights to make such demands - the officer is here
proceeding on the basis of "discovery" but wait a moment.
What has he/she discovered? Watch out for that
dreaded Schedule 36 notice when HMRC are just not as
sure of their discovery as they would normally be (or they
want to get all the documents without showing their hand).
This is their usual trick so that if you do not have a
"reasonable" basis appeal you end up giving the
documents or paying penalties.
Continued in the next column but if you have any doubts or
difficulties with any of this just pick up the phone and
chat to Bill on 07751720507
The comments on this site are personal views and solely those of the author who
retains the copyright. An investigation has its own peculiarities and unless you
start to work personally with Bill on a one to one basis no responsibility can be
taken for any actions that the reader decides to take (or not take) after reading
the text and articles. Unless you engage with the company and Bill Stevenson on
a proper fee paying client/tax adviser basis there can be no guarantee that you
will understand the best strategy for your own particular enquiry.
WAMS Tax Ltd - Bill Stevenson - 07751720507