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Special Relief for Excess Tax

August 19th, 2015

Special Relief is a form of Overpayment Relief which can only apply to amounts charged in HMRC determinations for income tax or corporation tax self-assessments where no other statutory remedy is available.  There is no time limit for claiming Special Relief.

A person who has received a notice to file a return must do so by the filing date.  If they don’t, HMRC can issue a determination of the tax due.  That tax is then legally due to be paid. There is no right of appeal against a determination.  Sending in a Tax Return within the time limit will displace the determination.  However, if these time limits are passed a person may claim Special Relief if:

  • HMRC have made a determination; and
  • the person is out of time to make a return; and
  • they are unable to claim Overpayment Relief.

Unlike claims to Overpayment Relief, Special Relief is not automatically excluded whenever:

  • A person ought to have known that they had some other means of correcting an overpayment or over-assessment, but they failed to use those other means within the relevant time limit; or
  • HMRC has already taken court action to recover amounts due under a determination, unless the person was present or was legally represented during the proceedings, or an agreement was reached to settle the proceedings.

However, the following strict requirements must be satisfied:

  • In the opinion of the taxman it would be “unconscionable” for HMRC to seek to collect the tax charged, or refuse to repay it if it has already been paid; and
  • The person’s tax affairs are otherwise up to date, or arrangements have been made to the satisfaction of HMRC, to bring them up to date; and
  • The person has not previously claimed Special Relief or its predecessor:  Equitable Liability – whether or not relief was given.   This may be disregarded in exceptional circumstances.

The taxman defines “unconscionable” as meaning “completely unreasonable” or “unreasonably excessive”.  In considering whether something is unconscionable HMRC will look at what behaviour it expects from any reasonable person in a similar situation. HMRC say it would only be “unconscionable” to seek to collect the tax charged in the following exceptional circumstances where taxpayers:

  • are suffering from a temporary or sporadic illness, and as a result find it particularly difficult to deal with the tax system; or
  • have not received notices or other communications for reasons outside their control; or
  • are insolvent and pursuing the amount in the determination would be to the detriment of other creditors.

For a claim to Special Relief to be successful, it must, among other things, explain why the taxpayer considers that it would be unconscionable for Her Majesty’s Revenue & Customs to recover the full amount charged by a determination.  HMRC say Special Relief will not normally apply where taxpayers:

  • are registered self employed and close the business but don’t tell HMRC;
  • cease self employment  and move but don’t provide a forwarding address;
  • are subcontractors who suffer deductions under CIS and, believing they have nothing further to pay, do not respond to determinations and other contacts.
  • are negligent and, although aware of their responsibilities to pay tax and to file returns on time, fail to act appropriately in relation to their tax affairs, and ignore all communications sent to them.

A Special Relief claimant must

  • confirm that their tax affairs are otherwise up to date, or
  • make arrangements with HMRC to bring any other outstanding matters up to date.

Fixed penalties for late delivery of an SA return are still payable following a claim for Special Relief.  Any daily penalties imposed for non delivery of a Self Assessment return are also not disturbed by a claim for Special Relief; even when the revised tax is reduced to nothing.  But if daily penalties are disproportionate to the amount payable, then they can be disputed outside the Special Relief Claim process.

How can Lynam Tax dispute specialists help?
If you need to make a claim to the taxman then expert help from Lynam Tax dispute Experts might make the difference between a successful claim and a refusal from the taxman.

*For a free, confidential chat about your tax affairs, don’t delay, call Paul Lynam now on 0845 643 9997

or Andrew Nutbrown on 07718 778710

What is Judicial Review?

August 12th, 2015

Judicial Review is a type of court proceeding in which a judge reviews the lawfulness of a decision, action or failure made by a public body (such as HMRC). It is usually the last resort in challenging the taxman’s Decisions.

Judicial Reviews are a challenge to the way in which a decision has been made, rather than the merits of the conclusion itself.  In other words, it is not really concerned with whether the conclusion is the right one.  The courts will not overturn HMRC’s decisions on Judicial Review if the correct procedures were followed; even if the courts would have come to a different conclusion.

The courts expect Judicial Review to be a last resort and expect parties to use Alternative Dispute Resolutions first (e.g. discussion, HMRC complaints procedure, Internal Review, appeals to the Tax Tribunal, Revenue Adjudicator, Ombudsman).  So Judicial Review may only be used where there are no alternative appeal routes available.

An application for Judicial Review must be filed no later than 3 months after the grounds to make the claim first arose.

Taxpayers can use Judicial Reviews to challenge statutes, assessments, determinations, notices, Information Notices, penalty determinations, and the failure by tax officers to act in accordance with previous advice or guidance, i.e:  a breach of a person’s Legitimate Expectation.

A decision made by HMRC can be challenged on grounds of illegality (e.g. acting beyond the powers conferred by law), irrationality (e.g. acting so unreasonably that no other public body would act in the same way), and procedural impropriety (e.g. actual or apparent bias, refusal of the right to a fair hearing, general unfairness, and abuse of power).

A breach of a taxpayer’s Legitimate Expectation can amount to unreasonable behaviour and therefore be an abuse of power.

Applications have to be detailed in writing to the court.  They may subsequently be “renewed” at an oral hearing if the paper application is unsuccessful.  If permission is granted then the case is heard at a substantive hearing.

A successful Judicial Review claim means the public authority has to make a fresh decision, taking into consideration the views of the court.  However, the new lawful decision could still be unfavourable.

The Upper Tribunal (of the Tax Tribunal) has jurisdiction to hear Judicial Review proceedings in cases where the High Court (in Scotland the Court of Session) transfers the proceedings to the UT and in cases where there is an application for Judicial Review lodged with the UT on a  challenge to a First Tier Tribunal decision.

Judicial Review is generally considered to be cumbersome, complex, lengthy, expensive and uncertain.  On the whole it has been the preserve of big business and the rich.

How can Lynam Tax Investigation Experts help me?
Lynam Tax partners have a vast amount of practical experience in managing tax investigations and tax enquiries.    We can advise you on the best course of action and if appropriate, help you manage any necessary disclosures, in order to obtain the optimum outcome for you, your business and your family.

*For a free, private, no obligation consultation, call Paul Lynam today on:  0845 643 9997

or Andrew Nutbrown :  07718 778710

Huge Increase in Penalties and Tax Offenders Tagging

August 11th, 2015

There have been big rises in the number of individuals placed in HMRC’s “Managing Serious Defaulters” programme, and also in the number of taxpayers being charged penalties for “deliberate behaviour” errors in their tax returns, according to a report in the professional journal Taxation recently.

Where the taxman investigates a business or individual and finds errors in the tax returns, then HMRC can charge tax-geared penalties.  The penalties are a percentage of the additional tax payable.  The amount of the penalty depends on the behaviour that led to the error.  Deliberate errors can have a penalty range of 50-100%; and up to 200% where an offshore bank account or asset is involved.

Where deliberate behaviour penalties are charged HMRC can also put the taxpayer in in the Managing Serious Defaulters (MSD) programme.  This is a form of tagging or a tax ASBO: where the tax inspectors then carry on closely monitoring the person’s tax affairs for the following 2 to 5 years.  If HM Revenue and Customs find further errors in that period, they are likely to charge swingeing penalties, or even prosecute.

The number of individuals and businesses charged with penalties for deliberate behaviour rose from 5,162 in 2012/13 to 14,401 in 2013/14.  The number of people placed in the MSD programme rose from 4,624 to 6,051.

How can Lynam Tax Enquiry Experts help me get a lower penalty?
Lynam Tax Enquiry Experts are specialists in tax penalty negotiations.  Our expertise often substantially reduces, and sometimes eliminates, the penalties that the taxman is demanding. We have helped hundreds of taxpayers achieve substantially lower penalties than those first sought by the taxman; including zero penalties in many cases.

NB. If you, or your client, are facing tax geared penalties, naming and shaming, or the Managing Deliberate Defaulters programme, Lynam Tax Enquiry Experts can help.  The earlier in a tax investigation or dispute you involve us the more we can potentially save you: in tax, interest, penalties and general grief and hassle.

For a free, confidential and no obligation discussion call today:

Paul Lynam :  0845 643 9997

Andrew Nutbrown :  07718 778710

or email partners@lynamtax.co.uk

What’s a “Reasonable Excuse” for a late tax return?

August 5th, 2015

If the taxman tells you that you have to send a completed tax return then there are penalties for not sending in the Return on time.  The later the Tax Return is the higher the penalties.  But penalties are not due if you have a “Reasonable Excuse”.

The taxman takes a hard line and usually tries to reject most excuses.  However, the Tax Tribunals have laid down guidance which HMRC must follow.  So HMRC have published their views of when they think a reason for late filing might be accepted by them as a Reasonable Excuse:

  • an exceptional or unexpected event, beyond your control, that prevented you from sending your return on time. In this case, you must send your return as soon as possible once the problem ends;
  • documents lost through theft, fire or flood that can’t be replaced in time;
  • life-threatening illness, for example a heart attack that prevents you dealing with your tax affairs;
  • death of a partner shortly before the deadline;
  • industrial action by Royal Mail over a lengthy period of time;
  • issues with the online service, with no work-round – you’ll need to provide the error message received.

If you believe you have a reasonable excuse you can ask for a penalty to be reconsidered. You should tell HMRC as soon as possible – don’t wait until you receive the penalty.

If the taxman doesn’t agree you can apply for Internal Review or appeal to the Tax Tribunal.  The Tax Tribunal has generally been a bit more generous in its interpretation of Reasonable Excuse than the taxman; and in worthwhile cases it may be worth considering an appeal.

If you need advice and help in a contentious tax dispute call Paul Lynam now on 0845 643 9997

or Andrew Nutbrown on 07718 778710

Offshore Assets: Tax Penalties Get Even Harsher

August 4th, 2015

The penalty regime where tax is understated and there’s a connection to an offshore asset or bank account has got even tougher from this year.

When, following an investigation or enquiry, additional tax is due HM Revenue and Customs can charge a penalty on top of the tax of an amount equal to 100% of the tax.  In other words, the penalty can double the liability, before any interest is charged.  But if the irregularities are related to offshore bank accounts or assets, then the penalties can be higher still.  This penalty regime connected to offshore assets has now been made even more punitive.

From summer 2015 the maximum tax-related penalty will be determined by the extent to which the foreign country shares information with the United Kingdom.  For the 90 countries (including the UK) that have signed up to the OECD’s Common Reporting Standard (whereby from 2017 financial information will be automatically reported and shared) the maximum penalty will stay at 100% of the tax (Category zero).  But for other countries with less transparency the penalties can be 125% (Category 1), 150% (Category 2), and even 200% (Category 3) of the evaded tax.  So a UK tax payer with undeclared tax of say £25,000 linked to a bank account in Dubai (Category 3) could face a combined tax and penalty bill of £75,000 (before interest is charged!).  This penalty regime now also covers Inheritance Tax – for the first time.

But the taxman is introducing further, hard-hitting, penalties for people who try to evade tax by moving their money to a less transparent jurisdiction.  Where funds are shifted after 27 March 2015 the penalties can then be increased by another 50%.  The start date for the money-shifting penalties applying has yet been announced, but it is likely to start by 2017 at the latest – with effective retrospection back to March 2015.  In our previous example, the tax bill of £25,000 could potentially produce a tax and penalty bill of £100,000 (if, say, the funds were move from Dubai to Singapore) plus interest!  The tax offender’s details would also be likely to be published by HMRC.

What does it mean for me?
If you have undeclared UK tax liabilities and an offshore bank account or asset then the penalties you could face and the chances of you being caught will increase massively once the Common Reporting Standard applies in 2017.

How can I improve my situation?

There are a number of disclosure facilities available whereby UK residents with offshore assets can settle their historic tax liabilities on very favourable terms.  Amongst these offshore disclosure facilities the Liechtenstein Disclosure Facility also offers a guaranteed immunity from prosecution.  But all of the existing disclosure facilities come to an end on 31 December 2015.  They will then be replaced by a less generous tax amnesty, which HMRC are now promising will be the last of its kind.

How can Lynam Tax Disclosure Experts help me?
Our Lynam Tax Disclosure Specialists have a massive amount of experience in dealing with tax investigations where offshore assets are concerned, and also in dealing with HMRC’s offshore disclosure facilities.  If you have any concerns please do not hesitate to contact our specialists for an initially free and entirely confidential disclosure:

Paul Lynam:  0845 643 9997

Andrew Nutbrown:  07718 778710

Rising Stars On Taxman’s Radar

July 30th, 2015

HMRC now have a special unit examining the tax affairs of UK resident individuals whose income or wealth is increasing very rapidly: but who are not yet candidates to be dealt with by the High Net Worth Unit or the Affluence Compliance Team: the so-called tax “Rising Stars”.

HM Revenue and Customs’ Rising Star Unit was formed in 2012.  In 2012/13 it carried out 38 tax investigations, bringing in extra revenue (i.e. tax, interest and penalties) f £4.9 million.  In 2013/14 it carried out 51 tax enquiries with yield of £6.6.M – an average or around £130,000 per tax investigation.

The ranks of the taxman’s Rising Stars are likely to be heavily dominated by: young premiership footballers; popstars and other music industry figures (e.g. DJs); film and television actors (and similar celebrities); city traders and hedge fund managers; along with entrepreneurs of fast-growing businesses (e.g. computer gaming and social media businesses).

In addition to the Rising Stars team, HMRC has 2 other specialist tax compliance teams with extra dedicated resources to examine the tax affairs of the wealthy.  The “Affluent Compliance Team” targets the 30,000 taxpayers with annual income over £150,000 or wealth between £2.5M- £20M.  The “High Net Worth Unit” targets the richest 6,200 individuals: typically those with wealth over £20 million.

What does it mean for me?
If you’re a young person with rapidly growing income or wealth you are increasingly likely to be targeted by a specialist investigation unit.  Also, if you are a colleague of anyone who has already been investigated by that unit (or say you share the same agent or tax or financial adviser) then you are also more likely appear on HMRC’s radar.  Of course, this doesn’t mean that you have done anything wrong.  But HMRC are extremely intrusive in their enquiries, and will be putting a lot of skilled effort into probing your financial affairs.  Unless the enquiry is properly managed on your behalf you are likely to have a lot of disruption: and potentially a very large tax bill to pay at the end of it.

How can Lynam Tax Enquiry Experts help me?
The tax investigation specialists at Lynam Tax have a massive amount of experience in dealing with tax enquiries by HMRC’s specialist units.  We are currently assisting a number of premiership footballers with their tax enquiries.  The taxman is using highly skilled, dedicated specialists to look at your affairs.  You need to be represented by equally experienced and highly skilled tax advisers.
If you, or one of your clients, is undergoing a tax enquiry do not hesitate to call for a free initial consultation:

Paul Lynam: 0845 643 9997

Andrew Nutbrown: 07718 778710

How do I prepare for a Tax Tribunal hearing?

July 28th, 2015

Only a very small number of tax disputes end up at the Tax Tribunal. The majority of tax enquiries and tax investigations end up with a negotiated settlement with HMRC.  Sometimes however it is not possible to reach an agreement with the taxman. If you reach an impasse with the Tax Inspector dealing with your case you can ask for an Internal Statutory Review. This can be an extremely effective way of bringing your case to a conclusion. However, if the HMRC Internal Reviewer also finds against you, then your only alternatives are to concede or to appeal to the independent First Tier Tribunal (a.k.a. the Tax Tribunal).

HMRC use specialist appeal teams to prepare for and appear at the Tax Tribunal hearings. However, if you decide to take the case yourself, or choose to be represented by your normal accountant, then the following tips will be useful to help you in your preparation.

1  Agree with HMRC in advance:

  • A statement of undisputed facts;
  • The documents to be presented;
  • Settlement of any minor points; by prior negotiation.

2  Prepare:

  • Know your case (and HMRC’s) thoroughly;
  • Keep your brief simple – avoiding excessive detail;
  • Identify your 3 or 4 strongest points;
  • Include each of these points at the:
    opening;
    examination; and
    summing up.
  • Prepare cross referenced bundles of evidence;
  • Prepare any witnesses thoroughly;
  • Anticipate counter arguments;
  • Practice your presentation.

3  Presentation

  • Appear calm and in control:  take your time;
  • Stick to your brief;
  • Watch the Tribunal judges, ensure that they understand;
  • Cross-examine HMRC’s witnesses;
  • Generally, only ask witnesses questions where you already know the answer;
  • Summing up:
    keep it simple;
    emphasise your strengths;
    highlight HMRC’s weaknesses.

How can Lynam Tax Dispute Experts help me?

Lynam Tax Dispute Experts
have a wealth of experience in dealing with contentious tax disputes, and with handling the appeals process. HMRC use specialist teams for appeals. You may well be at a major disadvantage if you do not use a specialist for your appeal case. Lynam Tax specialists can help you prepare for the hearing, and also advocate for you in front of the Tribunal.

If you are considering taking your case to appeal then why not talk to Lynam Tax experts today: for an initially free and objective discussion:

Paul Lynam: 0845 643 9997

Andrew Nutbrown: 07718 778710

VAT Fiddling Carpet Cleaner Convicted and Canned

July 27th, 2015

A self-employed carpet and upholstery cleaner from Perth in Scotland has been sentenced to 12 months imprisonment for attempting a VAT repayment fraud worth £45,000.

Kevin James Brown, aged 28 of Scone in Perth, had a turnover of £12,000 between July 2011 and July 2013.  On his VAT returns for that period he claimed to have bought supplies costing £258,867; so as to make fraudulent VAT repayment claims.   He had been paid £35,000 by HMRC before tax inspectors challenged him.

Brown pleaded guilty to being “knowingly concerned in the fraudulent evasion of Value Added Tax” of £34,436.08, and was sentenced to 12 months in prison.

How Could Lynam Tax Enquiry Experts Help Me?
We have decades of extensive practical experience in managing tax disclosures and tax fraud investigations.  If you have irregularities in your tax affairs we can advise you on your best course of action.  If appropriate, we will help you with any disclosure.  If you are already under criminal investigation we can assist in the preparation of the defence case.  We can help get the best possible outcome for you, your business and your family.

*For a free, private, no obligation consultation, call


Paul Lynam: 0845 643 9997


Andrew Nutbrown: 07718 778710

Tax Dodging Car Dealer Jailed

July 23rd, 2015

A 2nd car dealer with a multi-million pound turnover who operated off the grid for 14 years when it came to his tax affairs has been jailed for tax fraud after HMRC finally caught up with him.

Ambrose Smith, aged 71 of Norton in Gloucestershire, was not registered for Income Tax, VAT or National Insurance – despite selling millions of pounds worth of cars over a period of at least 14 years. He was a trade middleman: buying vehicles from dealers and auction sites and then selling to other dealers.  HM Revenue and Customs tax investigators found that millions of pounds had passed through his bank accounts; including an offshore bank account in the Channel Islands.  Smith did not keep any formal business records, but the tax inspectors discovered handwritten diaries (in a transporter on his driveway) recording the car sales. The tax officers also got copies of sales invoices from the car dealerships he had traded with.

Smith was charged with 2 counts of “cheating the public revenue”. He pleaded guilty and was sentenced to 4 years and 8 months imprisonment. The amount of the tax fraud was agreed at £789,809 from 1997-2011.  Smith had invested his gains in property in Gloucestershire. HMRC have started proceeds to recover the proceeds of these tax crimes.

How Could Lynam Tax Enquiry Experts Help Me?
We have decades of extensive practical experience in managing tax disclosures and tax fraud investigations.  If you have irregularities in your tax affairs we can advise you on your best course of action.  If appropriate, we will help you with any disclosure.  If you are already under criminal investigation we can assist in the preparation of the defence case.  We can help get the best possible outcome for you, your business and your family.

*For a free, private, no obligation consultation, call


Paul Lynam: 0845 643 9997


Andrew Nutbrown: 07718 778710

What are the Time Limits for Claims?

July 22nd, 2015

Rules introduced from 1 April 2010 changed and reduced the deadlines for taxpayers to make claims for tax reliefs.  Generally the time limit for direct taxes was reduced from five years and 10 months (six years for companies) to four years.  For VAT, the time limits increased from three to four years.

For individuals who are not in Self Assessment the new time limits took effect from 1 April 2012 not 2010.  This includes people who pay tax via PAYE or whose income is below the tax threshold.  Time limits now run from the end of the relevant tax year or taxable period (instead of being linked to filing dates).

For Income Tax and CGT some elections and claims relating to Self Assessment tax returns still have to be submitted by either one year or five years after the 31 January statutory filing deadline.  The one year claim period did not change.  The old five years and 10 months limit did change to four years for all claims submitted after 31 March 2010.

For Corporation Tax the old six years time limit changed to four years from the end of the Accounting Period, with effect from 1 April 2010.  This includes Error or Mistake claims.

The new deadlines

Individuals:

2011/12             5 April 2016

2012/13             5 April 2017

Companies:

APE:  1 April 2012       1 April 2016

APE:  1 April 2013        1 April 2017

Lynam Tax partners have a vast amount of practical experience in making successful claims, and in handling cases where HMRC dispute the claim. We can advise you on the best course of action, in order to obtain the optimum outcome.

*For a free, private, no obligation consultation, call Paul Lynam today on 0845 643 9997

or Andrew Nutbrown on 07718 778710

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